When Demand Is Inelastic, Revenues Increase and Production Costs Decrease

question 28

Multiple Choice

When demand is inelastic, revenues increase and production costs decrease as the quantity produced declines, total profits will always increase with a higher price. Therefore, monopolists:

• A) can't exist.
• B) can't exist for industries in which demand is relatively inelastic.
• C) can't maximize profits if they face a relatively inelastic demand.
• D) will always raise their price until they get to an elastic portion of the demand curve.

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Definitions:

Receivables Balance

The total amount of money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Average Collection Period (ACP)

Measures the average number of days it takes for a company to collect payments from its customers.

Financial Planning

The process of creating strategies for managing financial resources to meet life goals.

Sales Growth

The increase in sales over a specific period, indicating the competitiveness and overall health of a company.