Question

if a firm increases the price of their product in the elastic portion of the demand curve, total revenues will
a. decrease.
b. stay the same.
c. increase.
d. first increase and then decrease.

Explanation:

In the elastic portion of the demand curve, the percentage change in quantity demanded is greater than the percentage change in price. When a firm increases the price, the quantity demanded decreases by a larger proportion. Total revenue (TR = Price × Quantity) will decrease because the fall in quantity demanded has a bigger impact than the rise in price.

Answer:

A. decrease.