All but which one of the following statements are true, given a downward- sloping linear demand function?
A)MR is less than AR for all positive quantities.
B)When TR is at a maximum, MR is zero.
C)When the TR is increasing, AR is falling.
D)When TR is falling, price exceeds MR.

Question

Quizplus · Accepted Answer

According to the law of demand, as the price increases, the quantity demanded decreases. Therefore, a linear demand curve will be downward sloping.

A) True. Since the demand curve is downward sloping, the marginal revenue (MR) will always be less than the average revenue (AR) for all positive quantities.

B) True. When total revenue (TR) is at a maximum, the marginal revenue (MR) is zero. This is because at maximum revenue, any increase in quantity sold will result in a decrease in price, thereby reducing the revenue earned on each unit sold.

C) False. When the TR is increasing, the AR is also increasing. This is because as the quantity sold increases, the revenue earned on each unit sold also increases, given the constant price.

D) True. When TR is falling, it means that the price and quantity sold are both decreasing. However, the marginal revenue (MR) will always be lower than the price in a downward-sloping demand curve, so price will exceed MR.

All but Which One of the Following Statements Are True