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Chapter 8 Revenue Solutions

Question - 1 : -  How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

Answer - 1 : -

 Total Revenue = Market Price x Quantity sold

Question - 2 : - Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of good is Rs. 10.

Answer - 2 : -

Quantity sold 0

1

2

3

4

5

6

TR (?)

 

 

 

 

 

 

AR (?)

 

 

 

 

 

 

MR (?)

 

 

 

 

 

 

Answer

Question - 3 : -
What would be the shape of the demand curve so that the total revenue curve is
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?

Answer - 3 : -



(b) When TR is a horizontal line, demand curve is a rectangular hyperbola. It is shown:
           
The reason is that,the price at each level of output declines.

Question - 4 : - Comment on the shape of the MR curve in case the TR curve is a (i) positively sloped straight line, (ii) horizontal straight line. 

Answer - 4 : -  (i) When TR curve is positively sloped straight line, MR is a horizontal line. MR coincides with the demand curve. Price or AR is constant at each level of output.

                             

When AR is constant, MR is also constant.
                            

(ii) When TR is a horizontal straight line, MR is zero. It is because horizontal TR means when price falls, quantity demanded rises in the same proportion. Thus, MR is zero. MR curve coincides with the x-axis

Question - 5 : - From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:

Answer - 5 : -


Quantity

1

2

3

4

5

6

7

8

9

Marginal Revenue

10

6

2

2

2

0

0

0

-5

Answer

            


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