Which of the following correctly comments on the following statement? "The only way to increase the revenue from selling a product is to increase the product's price."
A) It is not true. Revenue will increase as the price of the product increases only if demand is elastic.
B) This statement is not true. Revenue will increase as the price of the product increases only if demand is inelastic.
C) The statement is true.
D) This statement is not true. Revenue will decrease as the price of the product increases because quantity demanded will fall.
Answer: B
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If a price ceiling is introduced in the market for milk below the market equilibrium price, then the producer surplus made by dairy farmers
A) will increase. B) will decrease. C) will not change. D) might increase or decrease depending on whether the demand for milk increases or decreases. E) might increase or decrease depending on whether the supply of milk decreases or increases.
A tax equal to the external marginal cost of an activity yields the efficient level of production because the tax
A) achieves the competitive equilibrium. B) forces producers to face all costs of production including the external cost. C) ensures greater profits for the firm. D) eliminates all pollution.