Suppose the Demand for Milk Is Relatively Inelastic

question 153

Multiple Choice

Suppose the demand for milk is relatively inelastic.What happens to sales revenue if the government imposes a price floor above the free-market equilibrium price in the market for milk?

• A)Sales revenue falls.
• B)Sales revenue rises.
• C)Sales revenue remains unchanged.
• D)It cannot be determined without information on prices.

---

Definitions:

Fixed Assets

Tangible assets expected to be used in business operations for a period longer than one year, such as equipment, real estate, and vehicles.

Full Capacity Sales

Full Capacity Sales represent the maximum sales level a company could achieve utilizing its available capacity without incurring additional capital expenses.

Net Income

Net income, also known as net profit, is the total earnings of a company after subtracting all expenses, taxes, and costs from total revenue; it indicates the financial health and profitability of a business.

Fixed Assets

Assets with a useful life extending beyond one year, used in the operations of a business, such as property, plant, and equipment.