Revenue and Producer's Equilibrium for CUET Economics

AnswerB · price × quantity sold

1. TR = P × q: everything the firm receives from its sales.

AnswerD · price

1. AR = TR ÷ q = (P × q) ÷ q = P, when every unit sells at the same price.

2. So the AR curve is the firm's demand curve.

AnswerA · the change in total revenue from selling one more unit

1. MRₙ = TRₙ − TRₙ₋₁.

AnswerC · ₹56

1. At 4 units the price is ₹14, and every unit sells at that price.

2. TR = 14 × 4 = ₹56.

AnswerA · ₹12

1. TR₂ = 18 × 2 = ₹36; TR₃ = 16 × 3 = ₹48.

2. MR₃ = 48 − 36 = ₹12, less than the price of ₹16.

AnswerC · At 5 and 6 units, ₹60, where MR falls to 0

1. TR: 20, 36, 48, 56, 60, 60. MR: 20, 16, 12, 8, 4, 0.

2. TR peaks at ₹60 and the 6th unit adds nothing (MR = 0).

AnswerB · AR ₹29, MR ₹20

1. AR₁₀ = 290 ÷ 10 = ₹29.

2. MR₁₀ = 290 − 270 = ₹20.

AnswerC · 5 units, at a price of ₹10

1. TR rises while MR is positive and is highest where MR = 0, at 5 units.

2. The price is read from AR at 5 units: ₹10 (point K). TR = 10 × 5 = ₹50.

AnswerA · To sell one more unit the firm must lower the price on all units, so each extra unit adds less than its price

1. The extra unit brings in its price, but the price cut on the earlier units takes some of that away.

2. So MR < AR whenever AR is falling; for a straight-line AR, MR is twice as steep.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: a negative change in TR is a fall in TR.

AnswerC · Both I and II

1. I is true: a price cut on all units makes MR fall below AR.

2. II is true: if every unit sells at the same price, each extra unit adds exactly that price.

AnswerD · TR is at its maximum

1. TR stops rising exactly when the extra unit adds nothing.

2. Profit is a different matter: it depends on cost too.

AnswerC · Both I and II

1. Both are true: each MR is a step in TR, and AR is TR per unit.

AnswerB · ₹12

1. AR = price = ₹12 at 5 units (TR = 60, and 60 ÷ 5 = 12).

AnswerA · ₹0

1. TR₅ = 12 × 5 = ₹60; TR₆ = 10 × 6 = ₹60.

2. MR₆ = 60 − 60 = ₹0: the 6th unit adds nothing to revenue.

AnswerC · ₹50 at every level of output

1. If every unit sells for ₹50, each extra unit adds exactly ₹50 to TR.

2. A constant AR means MR = AR.

AnswerB · MR is 0, so TR is at its maximum there

1. The MR line meets the quantity axis at 5 units: MR = 0.

2. TR rises while MR > 0 and falls once MR < 0, so it peaks at 5 units.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: a curve of the price at each quantity is the demand curve facing the firm.

AnswerB · ₹10

1. TR₄ = 15 × 4 = ₹60; TR₅ = 14 × 5 = ₹70.

2. MR₅ = 70 − 60 = ₹10.

AnswerA · ₹−4

1. TR₇ = 8 × 7 = ₹56; TR₆ = ₹60.

2. MR₇ = 56 − 60 = ₹−4: selling the 7th unit lowers total revenue.

AnswerC · ₹100

1. At Q = 5, P = 30 − 10 = ₹20.

2. TR = 20 × 5 = ₹100.

AnswerA · Only I

1. I is true: MR is the slope of TR; a flattening rise means a falling but positive slope.

2. II is false: with a falling price, MR and AR fall together, MR faster.

AnswerD · the same horizontal line at the market price

1. The firm can sell any quantity at the market price, so every unit earns that price: AR = MR = P.

AnswerC · 10, equal to the price

1. TR = 10 × q: each extra unit adds ₹10.

2. The slope of TR is MR, which equals the price, so TR is a straight line from the origin with slope 10.

AnswerA · when nothing is sold, revenue is zero

1. TR = P × q, and q = 0 gives TR = 0.

AnswerB · TR ₹600, AR ₹12, MR ₹12

1. TR = 12 × 50 = ₹600; AR = 600 ÷ 50 = ₹12.

2. The 50th unit sells for ₹12 like the rest, so MR = ₹12.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. Because it cannot move the price (R), it can sell all it wants at that price and nothing above it: a horizontal demand (AR) curve (A).

AnswerA · ₹25

1. The rise in TR per unit is MR, and for a price taker MR = P.

2. So the price is ₹25.

AnswerB · ₹40

1. Price = TR ÷ q = 800 ÷ 20 = ₹40.

2. For a price taker MR = price = ₹40.

AnswerB · becomes steeper

1. The slope of the TR line is the price; a higher price makes it steeper, still from the origin.

AnswerA · Only I

1. I is true: MR equals the fixed price, so TR rises by the same amount each unit.

2. II is false: with MR always positive, TR never stops rising.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: a constant slope (MR) from zero revenue at zero output gives a straight line through the origin.

AnswerD · it earns the maximum profit and has no reason to change its output

1. Equilibrium is the output that maximises profit, TR − TC.

2. Neither the most sales nor the lowest cost on its own is the aim.

AnswerA · MC = MR, and MC is rising (cuts MR from below)

1. While MR > MC, an extra unit adds to profit; while MR < MC, it subtracts. Profit peaks where they are equal.

2. MC must also be rising there, or the next units would add profit again.

AnswerD · At B (5 units), where MC is rising

1. After A, MC drops below MR, so producing more adds to profit: A is a point of least profit, not most.

2. At B, MC = MR and MC is rising: beyond B each unit costs more than it brings in. Equilibrium is at 5 units.

AnswerC · ₹20

1. MC₄ = TC₄ − TC₃ = 77 − 57 = ₹20.

AnswerC · 4 units, where MC = MR = ₹20 and MC is rising

1. MC: 15, 10, 12, 20, 26, 32. MR = price = ₹20 for every unit.

2. MC = MR at the 4th unit, and MC is rising there (12 → 20 → 26). So output is 4 units.

AnswerB · the gap TR − TC is largest

1. Profit is TR − TC, so the firm picks the output where that gap is widest.

2. Where TR = TC the firm only breaks even.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. Beyond a point where falling MC meets MR, MC drops below MR, so more output adds profit (R); that is why the firm goes on (A).

AnswerA · Only I

1. I is true: for a price taker MR = P, so MC = MR becomes P = MC.

2. II is false: equilibrium is the best it can do, which may be a normal profit or even a loss in the short run.

AnswerA · A-II, B-IV, C-I, D-III

1. MR > MC: the next unit adds profit; MR < MC: the last unit loses money.

2. MR = MC with rising MC is the equilibrium; with falling MC, more output still pays.

AnswerA · ₹−15

1. TR = 20 × 6 = ₹120; TC = ₹135.

2. Profit = 120 − 135 = ₹−15: going past the equilibrium turns profit into a loss.

AnswerA · Its MC of ₹26 is more than its MR of ₹20

1. MC₅ = 103 − 77 = ₹26, while the unit sells for ₹20.

2. It adds ₹6 more to cost than to revenue, cutting profit from ₹3 to ₹−3.

AnswerD · MC is ₹40 and rising

1. Profit is maximised where MC = MR with MC rising.

2. AC and the size of profit are not fixed by this condition.

AnswerC · rise above 5 units, along the rising MC curve

1. A higher MR line cuts the rising part of MC further to the right.

2. So the firm produces more when the price is higher.

AnswerC · A is true, but R is false.

1. A is true by definition.

2. R is false: at the profit-maximising output, the last unit adds zero profit (MR = MC).

AnswerC · Both I and II

1. Both approaches give the same answer: the largest TR − TC is where MR = MC with MC rising.

AnswerB · Each unit in this range adds to profit, so the firm should produce them

1. Profit changes by MR − MC with each unit.

2. Positive MR − MC means each of these units raises profit, which is why the firm goes on to B.

AnswerB · ₹3

1. At 4 units, TR = 20 × 4 = ₹80 and TC = ₹77.

2. Profit = 80 − 77 = ₹3. No other output gives more (₹3 at 3 units too, less elsewhere).

AnswerC · Producing up to MC = MR follows the rule; the 4th unit leaves profit unchanged at ₹3

1. Profit at 3 units = 60 − 57 = ₹3; at 4 units = 80 − 77 = ₹3: the 4th unit adds 20 − 20 = 0.

2. By convention the equilibrium is placed where MC = MR, here the 4th unit; profit is the same.

AnswerD · 3 units

1. MC = MR = ₹12 at the 3rd unit, and MC is rising there (10 → 12 → 15).

2. The 4th unit would add ₹8 of revenue for ₹15 of cost, so the firm stops at 3.

AnswerD · A is false, but R is true.

1. A is false: maximum TR ignores cost; the firm wants maximum TR − TC.

2. R is true and shows why A is wrong.

AnswerC · 5 units

1. MC: 15, 10, 12, 20, 26, 32. With MR = ₹28, the 5th unit adds ₹28 of revenue for ₹26 of cost, so it is produced.

2. The 6th unit would cost ₹32 for ₹28 of revenue, so the firm stops at 5: a higher price moves it up its MC curve to a larger output.

AnswerC · 4 units

1. MC = MR = ₹30 at the 4th unit, and MC is rising there (25 → 30 → 38).

2. The 5th unit costs ₹38 but earns only ₹30, so the firm stops at 4.

AnswerD · A-III, B-I, C-IV, D-II

1. Profit = 20q − TC: 2 units 40 − 45 = −5; 4 units 80 − 77 = 3.

2. 5 units 100 − 103 = −3; 6 units 120 − 135 = −15.