Q Test Yourself; Answer 1: We know that according to the demand curve, Total Revenue= Price X Quantity

Q Test Yourself; Answer 2: Let us assume AC=Average Cost, MC= Marginal cost

Q Discussion Question 2: Explain why a demand curve is also a curve of average revenue. Recalling that when an average revenue curve is neither rising nor falling, marginal revenue must equal average revenue, explain why it is always true that P = MR = AR for the perfectly competitive firm.

Q Discussion Question 3: a) Which is primarily responsible for the fact that the demand curve of a perfectly competitive firm is horizontal? Which is primarily responsible for the firm’s zero economic profits in long-run equilibrium? Discussion Question 3: Suppose that a tax of $28 is levied on each item sold by a monopolist, and as a result, it decides to raise its price by exactly $28. Why might this decision be against its own best interests?