How can a firm increase total revenue?
A) when demand is inelastic and the price decreases
B) when demand is inelastic and the price increases
C) when demand is elastic and the price increases
D) when demand is unitary elastic and the price decreases
E) when demand is unitary elastic and the price increases

Question

Quizplus · Accepted Answer

When demand is inelastic, an increase in price will result in a proportionately smaller decrease in demand, leading to an overall increase in total revenue. However, if the firm is already charging a very high price, increasing the price further may lead to a decrease in total revenue. Therefore, the best choice is B: when demand is inelastic and the price increases.

How Can a Firm Increase Total Revenue