Question

What is the revenue destruction effect? a. The loss in revenue a firm incurs on units...

What is the revenue destruction effect?

a. The loss in revenue a firm incurs on units it would have sold at a higher price when reducing price to sell extra units

b. The loss in revenue a firm incurs as a result of selling fewer units of output when raising price to increase profit

c. The loss in revenue a firm incurs due to brand level elasticities

d. The loss in revenue a firm incurs due to being in a perfectly competitive market

e. The loss in revenue a firm incurs due to predatory pricing

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Answer #1

Revenue destruction effect is related with that of change in price and change in output where if the firm increases its output, then the price will be reduced and the customers who were willing to pay a higher price would pay less price due to the increase in output and the reduction in price and this is actually called revenue destruction and that is the reason

(a) is the answer to this question

because revenue destruction is related to increase in quantity or output and decrease in price

(b,c,d) are wrong

Please Upvote. Thanks!

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