Question

Which of the following is not true for the price-inelastic range of a downsloping demand curve?

Answers:	a) Marginal revenue is negative.
	b) Profit maximization cannot occur.
	c) Average revenue cannot be positive.
	d) Total revenue decreases as sales quantity increases.

Answer 1

Option c

Average revenue cannot be positive

Total revenue is maximum when the marginal revenue is zero and elasticity is unit elastic, and the price and elasticity has a positive relationship but quantity and elasticity has a negative relationship.

The marginal revenue is negative, and the average revenue is positive.

Profit is maximum at MR=MC

where

MC is positve

MR is negative at inelastic demand curve so the profit cannot be maximum at inelastic demand curve.