Refer to the following graph:

-Suppose price rises from $90 to $110. Total revenue moves in the ________ (same, opposite) direction as the dominant effect. In this case, total revenue ____________ (increases, decreases, stays the same) because the quantity effect is _________ (larger than, smaller than, the same as) the price effect.
A) same; increases; larger than
B) same; decreases; smaller than
C) same; decreases; larger than
D) opposite; increases; larger than
E) opposite; decreases; smaller than

Question

Refer to the following graph:
 
-Suppose price rises from $90 to $110. Total revenue moves in the ________ (same, opposite) direction as the dominant effect. In this case, total revenue ____________ (increases, decreases, stays the same) because the quantity effect is _________ (larger than, smaller than, the same as) the price effect.
A) same; increases; larger than 
B) same; decreases; smaller than 
C) same; decreases; larger than 
D) opposite; increases; larger than 
E) opposite; decreases; smaller than

Quizplus · Accepted Answer

When the price increases, the price effect is dominating, causing the quantity demanded to decrease. As the demand is relatively inelastic, the decrease in quantity demanded does not offset the price effect, resulting in a decrease in total revenue. The quantity effect is smaller than the price effect in this case.

Refer to the Following Graph