For a firm selling at a given market price, which of the following statements about total revenue (TR) is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → The TR curve becomes flatter as the firm’s output rises.
With the price fixed, TR = p × q is a straight line from the origin with slope p.
Option (1) When output doubles, TR also doubles. — True. p × 2q = 2(p × q).
Option (2) TR is zero when the firm’s output is zero. — True. p × 0 = 0, so the TR curve passes through O.
Option (3) TR equals the market price of the good multiplied by the firm’s output. — True. This is the definition of TR.
Option (4) The TR curve becomes flatter as the firm’s output rises. — False. The slope is the price p, which stays constant. A straight line never becomes flatter.
NCERT (2026-27): “4.2 Revenue … Three observations are relevant here. First, when the output is zero, the total revenue of the firm is also zero. Therefore, the TR curve passes through point O. Second, the total revenue increases as the output goes up. Moreover, the equation ‘TR = p × q’ is that of a straight line because p is constant. This means that the TR curve is an upward rising straight line. 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.” |