Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph. The manufacturer of the over-the-counter pain reliever would ________ total revenue by increasing the price from $15 to $16.
A)increase
B)decrease
C)experience no change in
D)experience an uncertain change in

Question

Suppose that a new drug has been approved to treat a life-threatening disease. The demand for that drug is shown on the accompanying graph. Prior to approval of this drug, the only treatment for this condition was any one of several non-prescription, or over-the-counter, pain relievers. The demand for one brand of the several non-prescription pain relievers is also shown on the graph.  The manufacturer of the over-the-counter pain reliever would ________ total revenue by increasing the price from $15 to $16.
A)increase 
B)decrease 
C)experience no change in 
D)experience an uncertain change in

Quizplus · Accepted Answer

Along the upper half of a linear demand curve, demand is elastic with respect to price, so a price increase will decrease total revenue.

Suppose That a New Drug Has Been Approved to Treat