Refer to the following graph to answer the question: Suppose price rises from $90 to $110.Total revenue moves in the ________ (same,opposite)direction as the dominant effect.In this case,total revenue ____________ (increases,decreases,stays the same)because the quantity effect is _________ (larger than,smaller than,the same as)the price effect.
A)same; increases; larger than
B)same; decreases; smaller than
C)same; decreases; larger than
D)opposite; increases; larger than
E)opposite; decreases; smaller than

Question

Refer to the following graph to answer the question:  Suppose price rises from $90 to $110.Total revenue moves in the ________ (same,opposite)direction as the dominant effect.In this case,total revenue ____________ (increases,decreases,stays the same)because the quantity effect is _________ (larger than,smaller than,the same as)the price effect.
A)same; increases; larger than 
B)same; decreases; smaller than 
C)same; decreases; larger than 
D)opposite; increases; larger than 
E)opposite; decreases; smaller than

Quizplus · Accepted Answer

According to the graph, the demand is relatively elastic, meaning that a price increase reduces quantity demanded significantly enough to result in a decrease in total revenue. Thus, as the price rises from $90 to $110, the dominant effect is the decrease in quantity demanded (quantity effect), which is larger than the increase in price (price effect). Therefore, total revenue will decrease.

Refer to the Following Graph to Answer the Question