Which of the following is (are) true? A) If MR = 0, the price elasticity of demand is also equal to zero. B) If MR 0, then the price elasticity of demand is in the elastic range. D) B and C are true.

Question

Which of the following is (are) true?
A) If MR = 0, the price elasticity of demand is also equal to zero.
B) If MR < 0, the price elasticity of demand must be between zero and -1.
C) If MR > 0, then the price elasticity of demand is in the elastic range.
D) B and C are true.

Quizplus · Accepted Answer

B is true because when MR is negative, demand is elastic in nature, i.e. there is a relatively higher percentage change in quantity demanded than in price. Thus, the absolute value of price elasticity of demand (|PED|) must lie between 0 and 1, which also means PED is negative. 
C is true because if MR is positive, then an increase in price will lead to an increase in revenue, implying that demand is inelastic in nature. Here, |PED| < 1, which implies demand is inelastic.

Which of the Following Is (Are) True