A firm that produces a good with many substitutes will most likely find that:
A)lowering its price will increase total revenue.
B)lowering its price will decrease total revenue.
C)raising its price will increase total revenue.
D)lowering its price will not affect total revenue.

Question

Quizplus · Accepted Answer

The demand for a good with many close substitutes is likely to be elastic with respect to price. If demand is elastic with respect to price, then total revenue will rise as price falls.

A Firm That Produces a Good with Many Substitutes Will