CA Foundation · Business Economics · Theory of Demand and Supply
A seller faces the straight-line demand curve P = 100 − 2Q. At what quantity will total revenue be at its maximum?
Total revenue is maximum at Q = 25. With P = 100 − 2Q, marginal revenue is 100 − 4Q, which becomes zero at 25 units. At that point price is ₹50 and total revenue is ₹1,250, higher than at neighbouring outputs.
- AQ = 50
- BQ = 25Correct
- CQ = 20
- DQ = 40
Explanation
TR = P×Q = 100Q − 2Q². MR = 100 − 4Q. Setting MR = 0 gives Q = 25. Check: TR at 25 = 25×50 = ₹1,250, while at Q = 20 TR = 20×60 = 1,200 and at Q = 40 TR = 40×20 = 800. Q = 50 is where price is zero, so TR is zero, not maximum.
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