Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book). Under price-taking behavior, the total revenue curve should be:
A) an inverted U-shaped curve (first increasing and then decreasing).
B) a U-shaped curve (first decreasing and then increasing).
C) a horizontal line with vertical axis intercept equal to the market price.
D) a straight line from the origin with slope equal to the market price.

Question

Quizplus · Accepted Answer

Under price-taking behavior, the firm is a price taker and cannot influence the market price. This means that as the firm increases its quantity sold, its revenue will increase linearly with a slope equal to the market price. Therefore, the total revenue curve will be a straight line from the origin with slope equal to the market price.

Suppose We Plot the Total Revenue Curve with Quantity on the Horizontal