The Total Revenue Test Using the Price Elasticity of Demand

question 221

Multiple Choice

The total revenue test using the price elasticity of demand

• A) explains why monopolies will only operate on the elastic portion of their demand curve.
• B) explains why monopolies will only operate on the inelastic portion of their demand curves.
• C) demonstrates why a monopoly can earn an economic profit in the long run.
• D) determines whether a monopoly can perfectly price discriminate or not.
• E) cannot be used for a price discriminating monopoly.

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Definitions:

Percentage of Sales Methods

A financial forecasting model that bases future year's projections for various financial items as a fixed percentage of the annual sales figure.

Projected Income Statement

A financial statement that estimates a company's revenue, expenses, and net income for a future period.

Cash Budgeting

A forecast of cash flows based on expected receipts and disbursements rather than on projections of income statement and balance sheet accounts.

Supporting Detail

Supplemental information that explains, clarifies, or provides proof for statements made in a document or report.