Suppose the point (Q = 2,000,P = $60)is the midpoint on a certain downward-sloping,linear demand curve.Then
A) an increase in price from $40 to $42 will increase total revenue.
B) a decrease in price from $61 to $59 will leave total revenue unchanged.
C) the maximum value of total revenue is $120,000.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The midpoint of a linear demand curve is the point where total revenue is maximized. At this point, the price elasticity of demand is equal to -1. Therefore, a small increase in price will lead to a decrease in total revenue, and a small decrease in price will lead to an increase in total revenue.

Suppose the Point (Q = 2,000,P = $60)is the Midpoint