If the Price Elasticity of Demand for Gasoline Equals 0

question 221

Multiple Choice

If the price elasticity of demand for gasoline equals 0.3,then an increase in the price of a gallon of gasoline from $3.70 to $3.90

• A) decreases total revenue.
• B) increases total revenue.
• C) leads to no change in total revenue.
• D) makes the demand for gasoline elastic.
• E) Both answers B and D are correct.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Fixed Cost

A fixed cost is an expense that does not change with the level of goods or services produced by a business, such as lease payments or insurance premiums.

Sunk Cost

A sunk cost is a past expense that has already been incurred and cannot be recovered. Businesses cannot alter these costs with future decisions.

Uncontrollable Cost

Expenses that cannot be changed or influenced by the actions of a particular department or manager.