Q1 of 13 Page 99

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?

a) If the total revenue curve is a positively sloped straight line passing through the origin, then the slope of demand curve will be horizontal line parallel to X axis. It indicates that the price remains constant at all level of output.



b) If the total revenue curve is a horizontal line, then the demand curve will be downward sloping. The firms can increase their volume by decreasing price due to which average revenue will fall with increase in sales.



More from this chapter

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2

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



























Quantity



1



2



3



4



5



6



7



8



9



Marginal Revenue



10



6



2



2



2



0



0



0



-5


 3

What is the value of the MR when the demand curve is elastic?

 4

A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:





























Quantity



1



2



3



4



5



6



7



8



9



10



Price



100



90



80



70



60



50



40



30



20



10



Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost was Rs 1000, describe the equilibrium in the short run and in the long run.

 5

If the monopolist firm of Exercise 3, was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market), and the government decide to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?