This question goes back to the relationship between elasticity and revenue. We saw that with a price increase, revenue tends to rise due to the greater price paid per unit sold, but tends to fall due to the reduced number of units sold. Whether revenue actually increases or decreases, depends on which effect is stronger. The overall effect on revenue from an increase or decrease in price depends on demand elasticity. If demand is inelastic, regardless of which way price changes, we know that %Q < %P, and if demand is elastic %Q > %P.

In this question, elasticity is 3.5; meaning that demand is elastic. Specifically, it means that %Q = -3.5 x %P; or a percentage change in price leads to a percentage change in quantity 3.5 times greater, in the opposite direction. This means that if the firm lowers price, quantity sold will increase a great deal, causing revenue to increase.

5.A firm learns that the own price elasticity of a product it manufactures is 3.5. What would be the correct action for this firm to take if it wishes to raise its total revenue?

Raise the price because demand for the product is inelastic. This answer is wrong on two counts; the firm should lower price, and demand is elastic.
Lower the price because demand for the good is elastic. This is correct of course.
We need information on the firm's cost structure in order to answer this question. This would be true if the question were about profits rather than revenue, as long as demand is elastic. However, if demand is inelastic and the firm is a monopolist, we could answer the question in terms of profit without knowing anything about the firm's cost structure.
Raise the price because demand is elastic. This is incorrect because raising the price when demand is elastic lowers revenue, since the %Q > %P; meaning that the reduction in quantity overwhelms the increase in price.
Lower the price because demand is inelastic. While it is true that the firm should lower price, it isn't true that demand is inelastic so this answer isn't correct either.