BrightLight Ltd. estimates the demand curve for its table lamps to be Q = 1,000 - 4 P. That is, P = 250- .25Q. Which of the following is NOT true?
A) The maximum total revenue BrightlLight can obtain is $62,500.
B) The Marginal Revenue curve for BrightLight's table lamps is given by MR = 250 - ½ Q.
C) The elasticity of demand for BrightLight's table lamps is equal to 7.5 when their price is $125.
D) BrightLight maximizes its total revenues when selling 500 lamps.

Question

Quizplus · Accepted Answer

The elasticity of demand is calculated as (P/Q) * (dQ/dP). At a price of $125, the quantity demanded is 500. The elasticity is not equal to 7.5 at this price.