Use the following statements to answer this question:
I. Even though people need water to survive, the price of water is less than the price of diamonds because water is in greater supply than diamonds.
II. Suppose that the demand for corn is highly price inelastic. If every corn farmer's harvesting technologies become more efficient, the total revenue received by all corn farmers would fall.
A) I and II are true.
B) I is true, and II is false.
C) II is true, and I is false.
D) I and II are false.

Question

Quizplus · Accepted Answer

Statement I is true because the price of a good is determined by both supply and demand; water is more abundant than diamonds, leading to a lower price. Statement II is true because if demand is price inelastic, an increase in supply (due to more efficient harvesting) will lead to a decrease in total revenue as the percentage drop in price will outweigh the percentage increase in quantity sold.

Use the Following Statements to Answer This Question