-Suppose that, along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the
A) marginal revenue is positive at 100 units.
B) marginal revenue is negative at 100 units.
C) total revenue is at its maximum when 100 units are produced.
D) Both answers A and B are correct.
E) Both answers A and C are correct.

Question

-Suppose that, along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the
A) marginal revenue is positive at 100 units. 
B) marginal revenue is negative at 100 units. 
C) total revenue is at its maximum when 100 units are produced. 
D) Both answers A and B are correct. 
E) Both answers A and C are correct.

Quizplus · Accepted Answer

When the elasticity of demand is equal to 1, it means that the percentage change in quantity demanded is equal to the percentage change in price, indicating that total revenue is maximized. This is because any change in price upwards or downwards from this point will either decrease the quantity demanded more than it increases the price or decrease the price more than it increases the quantity demanded, respectively, leading to a decrease in total revenue.

-Suppose That, Along a Linear Demand Curve, the Elasticity of Demand