If a firm raises its price by 10 percent and total revenue remains constant, then
A) the price elasticity of demand for its output is unitary.
B) marginal revenue is equal to zero.
C) quantity demanded had decreased by 10 percent.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

When a firm raises its price by 10 percent and total revenue remains constant, it indicates that the quantity demanded has decreased by a proportion that leaves total revenue unchanged. This scenario is characteristic of unitary price elasticity of demand, where the percentage change in quantity demanded is equal to the percentage change in price, leading to no change in total revenue. Additionally, when total revenue remains unchanged as a result of a price change, marginal revenue—the change in total revenue from selling one more unit—is zero. Therefore, all the given statements are correct in this context.

If a Firm Raises Its Price by 10 Percent and Total