Maximum total revenue occurs when
A)Total revenue is -1.0.
B)The absolute value of the price elasticity of demand is 1.0.
C)Price multiplied by quantity is 1.0.

Question

Quizplus · Accepted Answer

The maximum total revenue occurs when the price elasticity of demand is equal to -1, which means that a small percentage change in price results in an equal and opposite percentage change in quantity demanded. Therefore, the optimal price level is the one which maximizes the product of price and quantity, resulting in the highest total revenue. When the absolute value of the price elasticity of demand is 1.0, the demand is said to be unit elastic, and at this point, total revenue is maximized.

Maximum Total Revenue Occurs When