When the marginal revenue resulting from a decrease in price

When the marginal revenue resulting from a decrease in price is negative, demand for the product is:

Elastic.

Unit elastic.

Inelastic.

Cannot be determined without more information.

Solution

Inelastic.

Explanation: If demand is inelastic (e< 1) then MR will be negative, because to sell a marginal unit the firm would have to lower the selling price so much that it would lose more revenue on the pre-existing units than it would gain on the incremental unit.