Elastic Supply Increases Total Revenue More Than Proportionally

Steps:

• Elastic supply means percentage increase in quantity supplied exceeds percentage increase in price (|Es| > 1).
• Total revenue (TR) = price × quantity supplied.
• For a price rise, quantity supplied rises by a larger percentage, so TR rises because the gain from higher quantity outweighs any proportional effect.
• Constant production costs affect profit but not TR calculation.

Why A is correct:

• With elastic supply, %ΔQs > %ΔP, so %ΔTR ≈ %ΔP + %ΔQs > 0 and amplified, causing TR to rise per the TR elasticity formula (1 + Es > 2).

Why the others are wrong:

• B: TR rises, not falls, as both P and Qs increase.
• C: Describes inelastic supply (%ΔQs < %ΔP), but question specifies elastic.
• D: Incorrectly states inelastic response and TR fall, but TR always rises for price increases along upward-sloping supply.

Final answer: A