An increase in price causes:I. a decrease in revenue due to the price effect.II. an increase in revenue due to the price effect.III. a decrease in revenue due to the quantity effect.IV. an increase in revenue due to the quantity effect.
A) I and III
B) II and III
C) II and IV
D) II only

Question

Quizplus · Accepted Answer

An increase in price typically leads to an increase in revenue due to the price effect (people are paying more for each unit sold), which is statement II. However, it can also lead to a decrease in revenue due to the quantity effect (fewer units are sold because of the higher price), which is statement III.

An Increase in Price Causes:I