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Figure: The Linear Demand Curve II
-(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:
A) decrease, as the price effect is dominated by the quantity effect.
B) increase, as the price effect dominates the quantity effect.
C) stay the same, as both the price and quantity effects remain unchanged.
D) stay the same, but the price effect is dominated by the quantity effect.

Question

Use the following to answer questions:
Figure: The Linear Demand Curve II 
-(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:
A) decrease, as the price effect is dominated by the quantity effect. 
B) increase, as the price effect dominates the quantity effect. 
C) stay the same, as both the price and quantity effects remain unchanged. 
D) stay the same, but the price effect is dominated by the quantity effect.

Quizplus · Accepted Answer

When price increases from $8 to $10, the quantity demanded decreases significantly, leading to a decrease in total revenue because the loss in revenue from selling fewer units outweighs the gain from the higher price per unit.

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