Chapter 9R, Problem 2MCQ

To determine

The economic concept through which it is easy for the farmers to determine whether the total revenue rises or falls if the market prices for tomatoes were to increase by 10%.

Answer to Problem 2MCQ

From the available options, the correct option is the price elasticity of demand.

Explanation of Solution

By calculating the price elasticity of demand, farmers can find out whether their overall total revenues would increase or decrease because it will help them to determine how price is elastic to demand. For instance, if the demand for tomatoes will price inelastic, then increasing in price will decrease farmers’ revenue. Whereas, deadweight loss determines the difference between production and consumption. The diminishing marginal utility tells with the increase in each additional unit, the total utility starts to decline and producer surplus shows the producer benefit at market price by selling goods. And, administrative costs show expenditures on equipment, rent, salaries, etc.

Therefore, no option other than the price elasticity of demand can help farmers to know their total revenue.

Here, the correct option is d.

Economics Concept Introduction

Total revenue is the consequence of price multiplied by quantity demanded and it is the sum of revenues from selling a particular good or service in the market.