Question

For three weeks in a row, the owner of a car rental agency increased the rental rate on compact cars yet TR increased each week. Assuming that there was no change in the relative demand, the firm must be operating in the inelastic portion of the demand curve.

A. True
B. False

Answer 1

The answer is True. When the owner of a car rental agency increases the rental rate on compact cars but the total revenue (TR) increases each week, it implies that the demand for compact cars is relatively inelastic.

Step-by-step explanation:

The answer is A. True. When the owner of a car rental agency increases the rental rate on compact cars but the total revenue (TR) increases each week, it implies that the demand for compact cars is relatively inelastic. In the inelastic portion of the demand curve, an increase in price leads to a proportionally smaller decrease in quantity demanded, resulting in an increase in total revenue.