Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day.

-Refer to the scenario above.Mr.Olivander used to sell two wands per day.Now he plans to cut back his sale to only one wand.The price effect of this plan is a ________,and the quantity effect of this plan is a ________ in his revenue.
A) $25 decrease; $130 increase
B) $90 decrease; $65 increase
C) $25 increase; $65 decrease
D) $65 decrease; $90 increase

Question

Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day.
 
-Refer to the scenario above.Mr.Olivander used to sell two wands per day.Now he plans to cut back his sale to only one wand.The price effect of this plan is a ________,and the quantity effect of this plan is a ________ in his revenue.
A) $25 decrease; $130 increase 
B) $90 decrease; $65 increase 
C) $25 increase; $65 decrease 
D) $65 decrease; $90 increase

Quizplus · Accepted Answer

If Mr. Olivander cuts back his sales from 2 wands per day to 1 wand per day, the price effect will be an increase of $25 in price per wand (from $75 to $100). The quantity effect will be a decrease of 65 wands sold per day (from 125 to 60). Therefore, the overall effect on revenue will be a decrease of $65 (from $18750 to $18685). Therefore, the correct choice is C.