Question

· Question 4

	Assuming a down-sloping demand curve and positive marginal cost, total revenue (TR) maximization requires: TR = 0 ATC = 0 MR = 0 Aπ = 0

· Question 5

	Assuming a down-sloping demand curve and positive marginal cost, the output at the maximum total profit (Tπ): Is less than that at the maximum total revenue Is greater than that at the maximum total revenue Can be greater or less than that at the maximum total revenue Occurs at MR=0

· Question 6

	In the long-run, a firm:
	Can minimize loss by shutting down its plant Making continuing losses should leave the industry May produce even it TR is less than TC at all output levels May not have enough time to leave and enter the industry

Answer 1

Question 4. Option C is correct. Total revenue is maximum when the marginal revenue is zero. This is because marginal revenue is the derivative of total revenue. Therefore when finding the maxima, marginal revenue will be zero

Question 5. Option A is correct. profit maximizing level of output is always less than the revenue maximizing level of output. This is because when revenue is maximum, marginal revenue zero and marginal cost is positive. This indicates that output level that maximizes profit has already reached

Question 6. Option B is correct . This is because when there are consistent losses firm can leave the industry and save the fixed cost.