13) The quantity effect of a price reduction causes: A) a decrease in revenue be

Question

13) The quantity effect of a price reduction causes: A) a decrease in revenue because of a lower price. B) an increase in revenue because of increased sales. C) an increase in labor demand due to increased sales of the product. D) a decrease in labor demand because of a lower price of the final p roduct. 14) The price effect of a price decrease by a monopolist refers to: A) the loss in revenue due to the price reduction. B) the increase in sales due to the price reduction. C) the increase in revenue because of an increase in sales. D) the decrease in the demand for labor due to the lower price of the final product Scenario: When a monopolist charges $5 f or its product, it sells 250 units of the product. When it decreases the price of the product to $4, it sells 325 units of the product. 15) Refer to the scenario above. What is the change in total revenue due to A) The total revenue increases by $25. B) The total revenue increases by $50. C) The total revenue decreases by $105. D) The total revenue decreases by $175. 16) Refer to the scenario above. Which of the following is true of the demand curve of the product in the price range of $4 to $5? A) The demand curve is elastic. B) The demand curve is inelastic. C) The demand curve is horizontal. D) The demand curve is upward sloping. 17) In case of a decrease in product prices: A) the quantity effect always dominates the price effect B) the price effect always dominates the quantity effect C) when the price effect dominates the quantity effect, total revenue increases. D) when the quantity effect dominates the price effect, total revenue increases. 18) In case of a decrease in product prices: A) the quantity effect always dominates the price effect B) the price effect always dominates the quantity effect. C) when the quantity effect dominates the price effect, total revenue decreases. D) when the price effect dominates the quantity effect, total revenue decreases. 19) In case of an increase in product prices: A) the quantity effect always dominates the price effect. B) the price effect always dominates the quantity effect. C) when the quantity effect dominates the price effect, total revenue is rising D) when the quantity effect dominates the price effect, total revenue is falling. 20) In case of an increase in product prices: A) the price effect is always zero. B) the quantity effect is always zero. C) when the price effect dominates the quantity effect, total revenue is rising. D) when the price effect dominates the quantity effect, total revenue is falling.

Explanation / Answer

13) The answer is C -) an increase in labor demand due to increased sales of the product.

because we dont know the effect of price decrease on quantity effect, so the increase in revenue or decrease in revenue cannot tell. the increase or decrease in revenue with price effect is relative to elasticity of the demand or the magnitude of change in quantity demanded due to decrease in price .but when the price decrease , we can say that there is a increase in quantity demanded of the product. to produce them , the firm hires more labor and hence the labor demand will increase.

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