The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that
A) product price increases as output increases.
B) product price decreases as output increases.
C) product price is constant at all levels of output.
D) marginal revenue declines as more output is produced.

Question

Quizplus · Accepted Answer

A linear and upsloping total revenue curve implies that the price of the product is constant at all levels of output. If the price were increasing as output increased, the total revenue curve would be concave-up (curving upward) rather than a straight line, and if the price were decreasing as output increased, the total revenue curve would be concave-down (curving downward). The slope of the total revenue curve is equal to the price, so a straight line indicates a constant price. Additionally, marginal revenue remains constant for a purely competitive firm, as each additional unit sold fetches the same price, so D is also incorrect.

The Fact That a Purely Competitive Firm's Total Revenue Curve