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Figure 2.12
-(Figure 2.12) As the price of the product rises from $0 to $40, what happens to total expenditures?
A) Total expenditures increase, reaching a maximum at a price of $40.
B) Total expenditures remain unchanged.
C) Total expenditures decrease, reaching a minimum at a price of $40.
D) Total expenditures first increase and then decrease, as price approaches the midpoint of the demand curve.

Question

Use the following to answer question:
Figure 2.12 
-(Figure 2.12) As the price of the product rises from $0 to $40, what happens to total expenditures?
A) Total expenditures increase, reaching a maximum at a price of $40. 
B) Total expenditures remain unchanged. 
C) Total expenditures decrease, reaching a minimum at a price of $40. 
D) Total expenditures first increase and then decrease, as price approaches the midpoint of the demand curve.

Quizplus · Accepted Answer

According to Figure 2.12, as the price of the product rises from $0 to $40, the quantity demanded decreases, but the increase in price more than offsets the decrease in quantity demanded, resulting in an increase in total expenditures. The maximum total expenditure occurs at a price of $40.

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