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1)Total revenue equals A
1)Total revenue equals
A. total cost minus profit.
B. price times quantity sold.
C. marginal revenue times the quantity sold.
D. the area between the demand curve and the marginal revenue curve.
2)
The price elasticity of demand measures the
a. magnitude of the response in quantity demanded to a change in price.
b. direction of the shift in the demand curve in response to a market event.
c. size of the shortage created by the increase in demand.
d. responsiveness of quantity demanded to a change in income.
Expert Solution
1)Total revenue equals B. price times quantity sold.
Total revenue is the income from sales. It is the total amount of money per unit of output sold. The money amount per unit sold is the price of the good. Thus, the total revenue equals the price per unit sold multiplied by the total number of units sold.
Option A is false because total revenue equals total cost plus profit.
Option C is true only for perfect competition. It is not true for all other imperfectly competitive markets.
Option D is false. Total revenue's area is rectangular, not triangle because it is the product of price and quantity sold.
2)
- The correct option is a. The magnitude of the response in quantity demanded to a change in price.
By the definition itself, the term price elasticity of demand (PED) refers to the responsiveness (magnitude) of the change in the quantity demanded when the price of the product changes.
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