A demand curve that is linear and downward sloping:
A) means that marginal revenue is equal to price.
B) means that total revenue is always upward sloping.
C) will result in a marginal revenue that is greater than price.
D) has a price elasticity of demand that is equal to -1 when marginal revenue is equal to zero.

Question

Quizplus · Accepted Answer

A linear and downward-sloping demand curve implies that as price decreases, quantity demanded increases, but at a decreasing rate. Marginal revenue (MR) is derived from the demand curve and is also downward sloping, but it decreases twice as fast. When MR is equal to zero, this indicates the point of unitary elasticity on the demand curve, where the price elasticity of demand is indeed equal to -1. This is because at this point, any change in price is exactly offset by a change in quantity demanded in percentage terms, leaving total revenue unchanged. Choices A, B, and C do not accurately describe the properties of a linear and downward-sloping demand curve and its relationship with marginal revenue and price elasticity of demand.

A Demand Curve That Is Linear and Downward Sloping