Question

1)

As quantity increases for a price-taking firm

Group of answer choices

a Total revenue may increase or decrease

b Total revenue will increase

c Marginal revenue will increase

d Marginal revenue decreases

2)

Suppose a price-taking firm has the following total costs. What is the profit-maximizing quantity the firm should produce assuming the price of the good is 60?

Quantity	0	1	2	3	4	5	6	7	8
Total Cost	200	300	370	420	460	510	570	650	750

Group of answer choices

a Q = 4

b Q = 2

c Q = 0

d Q = 6

e Q = 8

Answer 1

1) For a price talking firm as quantity increases marginal revenue remains constant which is equal to the price. As a result, if quantity increases for a price taking firm, total revenue will increase.

Hence, option b is correct.

2)

Quantity	0	1	2	3	4	5	6	7	8
Marginal Cost	–	100	70	50	40	50	60	80	100

For a price taking form the profit maximizing quantity is the one at which the marginal cost is equal to the price. Here Marginal Cost= Price= 60 occurs at the Quantity= 6.

The profit maximizing quantity: Q= 6

Therefore, option d is correct.