Suppose that at a price of €30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to €40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?
A) €0 per month
B) €30 per month
C) €40 per month
D) Either €30 or €40 per month because the price elasticity of demand is 1.0.

Question

Quizplus · Accepted Answer

At a price of €30 per month, Small Town Cablevision earns a total revenue of €30 * 30,000 = €900,000. At a price of €40 per month, Small Town Cablevision earns a total revenue of €40 * 20,000 = €800,000. Therefore, Small Town Cablevision earns the greatest total revenue at a price of €30 per month.

Suppose That at a Price of €30 Per Month, There