Table 6-4
The publisher of a magazine gives his staff the following information:

He tells the staff, "Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost."
-Refer to Table 6-4.Which of the following statements is correct?

Question

Table 6-4
The publisher of a magazine gives his staff the following information:
  
He tells the staff, "Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost."
-Refer to Table 6-4.Which of the following statements is correct?

Quizplus · Accepted Answer

The publisher's proposal suggests that increasing the price will result in the revenues being equal to costs. This means that the demand is perfectly inelastic, where the change in price has no effect on the quantity demanded. If the demand were elastic or unit elastic, the increase in price would cause a decrease in quantity demanded, leading to a decrease in revenue.

Table 6-4 The Publisher of a Magazine Gives His Staff the Following