A marketing manager has just estimated that her firm's marginal revenue will become negative if a proposed price cut is made. This means that:

Question

Quizplus · Accepted Answer

If the marginal revenue is negative, it means that the price cut will lead to a decrease in total revenue. This is because the additional units sold at the lower price will not be enough to make up for the reduction in revenue from the units sold at the higher price. This suggests that demand is relatively inelastic, as inelastic demand is characterized by a decrease in total revenue when the price is lowered. Therefore, the best explanation for the scenario presented is that while more units may be sold, total revenue will be less than it would be at the higher price.

A Marketing Manager Has Just Estimated That Her Firm's Marginal