Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Total revenue curve of a price-taking firm — Its slope equals the market price
The TR curve rises by p for each extra unit sold, so its slope is the market price.
Option (1) Price line — Its height at any output equals the firm’s total revenue — Incorrect. The height of the price line is the market price. Total revenue is the height of the TR curve.
Option (2) Total revenue curve of a price-taking firm — Its slope equals the market price — Correct. Its slope Aq1/Oq1 equals p.
Option (3) Market supply curve — Vertical summation of the supply curves of individual firms — Incorrect. The market supply curve is the horizontal summation: quantities are added at each price.
Option (4) Vertical supply curve — Price elasticity of supply equal to one — Incorrect. A vertical supply curve does not respond to price at all, so its elasticity is zero.
NCERT (2026-27): “4.2 Revenue Third, consider the slope of this straight line. When the output is one unit (horizontal distance Oq1 in Figure 4.1), the total revenue (vertical height Aq1 in Figure 4.1) is p × 1 = p. Therefore, the slope of the straight line is Aq1/Oq1 = p.” “Price Line. The price line shows the relationship between the market price and a firm’s output level. The vertical height of the price line is equal to the market price, p.” “4.7 Price Elasticity of Supply … When the supply curve is vertical, supply is completely insensitive to price and the elasticity of supply is zero.” “Summary … The market supply curve is obtained by the horizontal summation of the supply curves of individual firms.” |