In the case of a downward linear demand curve, total revenue is always maximised at
A)at the upper end of the demand curve
B)at the lower end of the demand curve
C)at the midpoint of the demand curve
D)it is impossible to tell without knowing the price and quantity demanded

Question

Quizplus · Accepted Answer

In the case of a downward linear demand curve, total revenue is maximized at the midpoint of the demand curve. This is because at this point, the price elasticity of demand is equal to 1 and any decrease in price is exactly offset by an increase in quantity demanded, resulting in no change in total revenue. Any price decrease below the midpoint would result in a larger increase in quantity demanded than the decrease in price, leading to an increase in total revenue. Similarly, any price increase above the midpoint would result in a larger decrease in quantity demanded than the increase in price, leading to a decrease in total revenue.

In the Case of a Downward Linear Demand Curve, Total