Q.1 What is Total Revenue (TR) in microeconomics?
The revenue from selling one more unit of a product
The price of a product multiplied by the quantity sold
The total cost of producing goods
The difference between total revenue and total cost
Explanation - Total Revenue is calculated as the price per unit multiplied by the quantity sold.
Correct answer is: The price of a product multiplied by the quantity sold
Q.2 How is Average Revenue (AR) calculated?
Total Revenue divided by quantity sold
Change in Total Revenue divided by change in quantity
Total Cost divided by quantity sold
Total Revenue minus Total Cost
Explanation - Average Revenue is the revenue per unit, calculated as Total Revenue divided by the quantity sold.
Correct answer is: Total Revenue divided by quantity sold
Q.3 Marginal Revenue (MR) is defined as:
Revenue from all units sold
Revenue from selling one additional unit
Average revenue per unit
Revenue minus cost
Explanation - Marginal Revenue measures the change in total revenue resulting from the sale of one additional unit.
Correct answer is: Revenue from selling one additional unit
Q.4 In perfect competition, the relationship between AR and price is:
AR is higher than price
AR is lower than price
AR equals price
AR varies with output
Explanation - In perfect competition, the price is constant, so Average Revenue equals the price.
Correct answer is: AR equals price
Q.5 When Marginal Revenue is zero, Total Revenue is:
Maximized
Minimized
Negative
Equal to Marginal Cost
Explanation - Total Revenue reaches its maximum when Marginal Revenue is zero.
Correct answer is: Maximized
Q.6 What happens to Total Revenue when price decreases and demand is elastic?
TR decreases
TR increases
TR remains constant
TR becomes zero
Explanation - If demand is elastic, a decrease in price leads to a proportionally larger increase in quantity demanded, increasing total revenue.
Correct answer is: TR increases
Q.7 If demand is inelastic, lowering the price will:
Increase total revenue
Decrease total revenue
Have no effect
Double the revenue
Explanation - When demand is inelastic, the percentage change in quantity demanded is less than the percentage change in price, so total revenue falls.
Correct answer is: Decrease total revenue
Q.8 The point where AR curve intersects MR curve is:
At maximum AR
At maximum TR
At minimum MR
At zero TR
Explanation - Total revenue is maximized at the point where Marginal Revenue becomes zero, which is where the AR curve intersects the MR curve.
Correct answer is: At maximum TR
Q.9 Which of the following is true in a monopoly?
AR = MR
MR < AR
MR > AR
MR = 0 always
Explanation - In monopoly, the Marginal Revenue curve lies below the Average Revenue curve because the firm must lower price to sell more units.
Correct answer is: MR < AR
Q.10 If AR is falling, the demand is considered:
Perfectly elastic
Elastic
Inelastic
Unitary
Explanation - A falling AR indicates that the firm is in the elastic portion of the demand curve.
Correct answer is: Elastic
Q.11 Unitary elasticity occurs when:
TR increases with price decrease
TR decreases with price decrease
TR remains constant with price change
TR is zero
Explanation - Unitary elasticity means the percentage change in quantity demanded equals the percentage change in price, keeping total revenue constant.
Correct answer is: TR remains constant with price change
Q.12 Which revenue curve is always downward sloping for a firm?
AR curve
MR curve
TR curve
Both AR and MR curves
Explanation - The Marginal Revenue curve is downward sloping for all firms with a downward sloping demand curve.
Correct answer is: MR curve
Q.13 Total Revenue can be represented graphically as:
Area under AR curve
Slope of MR curve
Difference between AR and MR
Area under demand curve multiplied by quantity
Explanation - Total Revenue is the product of price and quantity, which graphically is the area under the demand (AR) curve up to the quantity sold.
Correct answer is: Area under demand curve multiplied by quantity
Q.14 If MR is positive, TR is:
Increasing
Decreasing
Constant
Zero
Explanation - A positive Marginal Revenue indicates that Total Revenue is increasing with each additional unit sold.
Correct answer is: Increasing
Q.15 If MR is negative, TR is:
Increasing
Decreasing
Maximum
Constant
Explanation - A negative Marginal Revenue means that selling an additional unit decreases total revenue.
Correct answer is: Decreasing
Q.16 Which of the following is true in perfect competition?
MR curve is horizontal
AR curve slopes downward
TR decreases with output
MR < AR
Explanation - In perfect competition, price is constant, so Marginal Revenue is constant and the MR curve is horizontal.
Correct answer is: MR curve is horizontal
Q.17 Relationship between MR and elasticity of demand:
MR > 0 when demand is inelastic
MR = 0 when demand is unitary elastic
MR < 0 when demand is elastic
MR is independent of elasticity
Explanation - Marginal Revenue is zero at the point of unitary elasticity because Total Revenue is maximized at this point.
Correct answer is: MR = 0 when demand is unitary elastic
Q.18 Total Revenue is maximum when:
MR > 0
MR = 0
MR < 0
AR = 0
Explanation - Total Revenue reaches its maximum where Marginal Revenue is zero.
Correct answer is: MR = 0
Q.19 If AR is constant, the market is likely:
Monopoly
Oligopoly
Perfect competition
Monopolistic competition
Explanation - In perfect competition, price remains constant as output changes, so Average Revenue is constant.
Correct answer is: Perfect competition
Q.20 If price falls and TR remains unchanged, the demand is:
Elastic
Inelastic
Unitary elastic
Perfectly elastic
Explanation - When Total Revenue does not change with a price change, demand is unitary elastic.
Correct answer is: Unitary elastic
Q.21 AR curve in monopoly is:
Horizontal
Upward sloping
Downward sloping
Vertical
Explanation - The Average Revenue (demand) curve in monopoly slopes downward because the monopolist can sell more only at lower prices.
Correct answer is: Downward sloping
Q.22 MR becomes negative when:
TR is increasing
TR is maximum
TR is decreasing
TR is zero
Explanation - When Marginal Revenue is negative, selling an additional unit decreases Total Revenue, meaning TR is falling.
Correct answer is: TR is decreasing
Q.23 If a firm faces a perfectly elastic demand, what is the MR for any unit sold?
Zero
Equal to price
Negative
Cannot be determined
Explanation - For perfectly elastic demand, price is constant, so MR equals the price for each unit sold.
Correct answer is: Equal to price
Q.24 When the demand curve is downward sloping, MR is always:
Equal to AR
Greater than AR
Less than AR
Zero
Explanation - For a downward sloping demand curve, MR lies below AR because the firm must lower price to sell additional units.
Correct answer is: Less than AR