A new per unit subsidy for hybrid car production increases the supply of hybrid cars. If hybrid cars are elastically demanded, what will happen to total revenues from hybrid car production?
A) They will rise.
B) They will fall.
C) They will remain the same.
D) They will change in an indeterminate direction.

Question

Quizplus · Accepted Answer

When demand is elastic, a decrease in price (due to increased supply) leads to a proportionally larger increase in quantity demanded, thus increasing total revenue.

A New Per Unit Subsidy for Hybrid Car Production Increases