When marginal revenue is positive for a linear (inverse) demand function, decreases in output will cause total revenues to
A)increase.
B)decrease.
C)remain unchanged.
D)there is not sufficient information to classify the elasticity of demand.

Question

Quizplus · Accepted Answer

When marginal revenue is positive for a linear (inverse) demand function, it means that the demand function has an elastic region where a small decrease in output will cause a relatively larger increase in price. Therefore, if the output is decreased, the price will increase, but the decrease in quantity sold will be larger, resulting in a decrease in total revenue. Hence, option B is the correct answer.

When Marginal Revenue Is Positive for a Linear (Inverse) Demand