If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:
A) no change in his total revenues.
B) everyone to begin buying his product.
C) a complete loss of revenues.
D) a new demand curve.
E) a relative increase in income.

Question

Quizplus · Accepted Answer

A perfectly horizontal demand curve indicates perfectly elastic demand, meaning consumers will not buy the product at any price higher than the market price. Thus, setting a price even slightly higher results in a complete loss of sales and revenues.

If a Supplier Faces a Perfectly Horizontal Demand Curve and Sets