What is the revenue destruction effect?
A)The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units
B)The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit
C)The loss in revenue a firm incurs due to brand level elasticities
D)The loss in revenue a firm incurs due to being in a perfectly competitive market
E)The loss in revenue a firm incurs due to predatory pricing

Question

Quizplus · Accepted Answer

The revenue destruction effect refers to the loss in revenue that a firm incurs when it reduces the price of its product to sell extra units. This occurs when the firm sells additional units at a lower price that it would have sold at a higher price, resulting in a lower overall revenue. This effect is known as revenue destruction because the firm destroys its potential revenue by lowering the price.

What Is the Revenue Destruction Effect