A firm is operating in a market where it can sell more only by loweri…

The correct answer is Option (1) → (B), (C), (D), (A)

The firm described is operating in an imperfectly competitive market (such as monopoly or monopolistic competition), where the demand curve is downward-sloping, meaning it must lower its price to sell more. Total Revenue (TR) curve for such a firm is an inverted U-shape. The sequence of changes as the quantity sold increases (by lowering the price) is:

1. (B) Total revenue starts from origin. Total revenue is Price ($\text{P}$) $\times$ Quantity ($\text{Q}$). At $\text{Q}=0$, $\text{TR}=0$.

2. (C) Total revenue increases at a diminishing rate. In the elastic region of the demand curve ($\text{MR}$ is positive), a drop in price causes a proportionally larger increase in quantity, so TR is rising. However, because the marginal revenue ($\text{MR}$) is falling, the rate at which TR increases is diminishing.

3. (D) Total revenue reaches its maximum. This occurs at the point of unit elasticity on the demand curve, where marginal revenue ($\text{MR}$) equals zero.

4. (A) Total revenue falls. In the inelastic region of the demand curve ($\text{MR}$ is negative), a further drop in price causes a proportionally smaller increase in quantity, leading to a net decrease in Total Revenue.