Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total cost
B
Quantity supplied
C
Total output
D
Total revenue
Understanding the Answer
Let's break down why this is correct
Answer
Price elasticity of demand measures how much the quantity demanded of a product changes when its price changes. When demand is elastic, lowering the price increases total revenue, while raising the price decreases it. Similarly, the marginal revenue product (MRP) of a resource shows how much additional revenue is generated from using one more unit of that resource. Just like price changes affect total revenue, changes in the amount of a resource used will affect the total output and thus the total revenue generated. Therefore, marginal revenue product is to total revenue as price elasticity of demand is to total revenue, as both concepts explain how changes in one aspect influence overall revenue.
Detailed Explanation
Just like price elasticity affects total revenue, marginal revenue product affects total revenue too. Other options are incorrect because Some might think that marginal revenue product relates to costs; People might confuse supply with revenue.
Key Concepts
Price elasticity of demand
Marginal revenue product
Total revenue
Topic
Understanding Elasticity and Revenue
Difficulty
easy level question
Cognitive Level
understand
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