What Is the Effect of a 10 Percent Price Increase

question 175

Multiple Choice

What is the effect of a 10 percent price increase on total revenue if elasticity is zero?

• A)Revenue increases by 10 percent.
• B)Revenue increases by less than 10 percent.
• C)Revenue does not change.
• D)Revenue decreases.
• E)Revenue drops to 0.

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Definitions:

T-Bill Rate

The yield or interest rate paid to investors in U.S. Treasury bills, which are short-term government securities.

Call Option

A financial agreement allowing the purchaser the option, rather than the requirement, to purchase a given stock, bond, commodity, or different asset at an agreed-upon price within a certain timeframe.

Value Increase

Refers to the rise in worth or price of assets, investments, or goods over time.

Black-Scholes

A mathematical model of a financial market containing derivative investment instruments, primarily used for pricing European call and put options.