Along a Linear Demand Curve, Total Revenue Is Maximized When

question 33

Multiple Choice

Along a linear demand curve, total revenue is maximized when demand is

• A)elastic
• B)inelastic
• C)unit elastic
• D)perfectly elastic
• E)perfectly inelastic

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Definitions:

Long-Run Equilibrium

Long-run equilibrium occurs in a market when all firms earn normal profits, and no new firms have an incentive to enter or exit, resulting in market stability over time.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production expenses by the quantity of units manufactured.

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, factoring in the cost of opportunity.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in a competitive market make just enough profit to cover their costs.