Suppose a firm lowers its price in order to increase sales.The lower price will reduce the revenue the firm earns on the
A) Marginal units
B) Inframarginal units
C) Surplus units
D) Incremental units

Question

Quizplus · Accepted Answer

Inframarginal units are the units sold at the original higher price before the price reduction. Since the price reduction only affects the marginal units (the units sold at the lower price), the revenue loss will only occur on these units. Therefore, the revenue earned from the inframarginal units remains the same, while the revenue earned from the marginal units decreases due to the price reduction.

Suppose a Firm Lowers Its Price in Order to Increase