Suppose a firm lowers its price in order to increase sales.The lower price will reduce the revenue the firm earns on the:
A) marginal units.
B) inframarginal units.
C) surplus units.
D) incremental units.

Question

Quizplus · Accepted Answer

The inframarginal units refer to the units of the product that are sold at the original price. By lowering the price, only these units will earn the reduced price, which will decrease the revenue earned on these units. The marginal units, on the other hand, refer to the additional units that are sold due to the lowered price, and the revenue earned on these units may increase due to the higher volume of sales. Surplus and incremental units are not accounting measures commonly used in economic analysis.

Suppose a Firm Lowers Its Price in Order to Increase