Question

1. One of the problems associated with market or price power is that if you actually exercise that power, there is a tendency toward losing that power.
   

True

False

2.If you raise prices and you are operating in the _________ range (before and after), total revenue will ________.

		elastic; fall
		inelastic; fall
		elastic; rise
		inelastic; will remain the same.

Answer 1

Answer 1 - False

The given statement is false because if any firm gains rhe market or the price power , he is in a condition to influence the quantity or the price of the goods in the market. Hence he influences the price to gain more and more profits. The adverse conditions are mostly not faced. These conditions exist mostly in monopolistic or the monopoly competition.

Answer 2 - Option A

Elastic , fall

If the demand will be elastic , the price rise will cause the demand for the product to fall , hence the total revenue will fall.

If the demand will be inelastic , the demand will not change and hence TR will also not change. Hence option A is correct.