A downward- sloping AR curve implies that:
A)AR is below MR at all positive levels of output.
B)price is falling as output rises.
C)TR is falling as output increases.
D)profits are decreasing as price falls.

Question

Quizplus · Accepted Answer

A downward-sloping AR curve means that as output increases, price (average revenue) is falling. This is because in order to sell more units, the firm must lower its price to attract buyers. Therefore, B is the correct answer. A is not correct because it is possible that MR could be above or below AR depending on the elasticity of demand. C is not necessarily true because TR could possibly rise at lower levels of output before it starts to fall. D is not the best choice because we cannot assume anything about profits from the information given.

A Downward- Sloping AR Curve Implies That