The total revenue curve that corresponds to a downward-sloping linear demand curve
A)slopes downward
B)slopes upward
C)is a horizontal line
D)first rises, then falls
E)first falls, then rises

Question

Quizplus · Accepted Answer

The total revenue curve first rises then falls with a downward-sloping linear demand curve. This is because when the price is high (at the left end of the curve), the quantity demanded is low, so the total revenue is also low. As the price decreases (moving to the right along the curve), the quantity demanded increases, thereby increasing the total revenue. However, at a certain point, the decrease in price will lead to a decrease in revenue since the increase in quantity demanded will not be enough to offset the decrease in price. Therefore, the total revenue curve first rises, reaches its maximum point, and then falls.

The Total Revenue Curve That Corresponds to a Downward-Sloping Linear