Use the following to answer question:
-(Figure: The Linear Demand Curve II)Use Figure: Linear Demand Curve II.If price was initially set at $8 and then increased to $10,total revenue would:
A)decrease,as the price effect is dominated by the quantity effect.
B)decrease,as the price effect dominates the quantity effect.
C)stay the same,as both the price and quantity effects remain unchanged.
D)increase,as the price effect is dominated by the quantity effect.

Question

Use the following to answer question: 
-(Figure: The Linear Demand Curve II)Use Figure: Linear Demand Curve II.If price was initially set at $8 and then increased to $10,total revenue would:
A)decrease,as the price effect is dominated by the quantity effect. 
B)decrease,as the price effect dominates the quantity effect. 
C)stay the same,as both the price and quantity effects remain unchanged. 
D)increase,as the price effect is dominated by the quantity effect.

Quizplus · Accepted Answer

When the price increases from $8 to $10, the quantity demanded decreases. The price effect (higher price per unit sold) might increase revenue, but if the decrease in quantity demanded (quantity effect) is large enough, total revenue can decrease. In this case, the quantity effect dominates the price effect, leading to a decrease in total revenue.

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