CFA Practice Question

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CFA Practice Question

When price is constant, total revenue ______ when the firm increases its output.

A. rises and then falls
B. increases at a decreasing rate
C. increases at a constant rate
Correct Answer: C

Total revenue is an upward-sloping straight line when price is constant. The constant price means that total revenue is increasing at a constant rate.

User Contributed Comments 7

User Comment
danlan Total revenue=Price*quantity
chamad A is false because the firm may increase quantity
Thescholar The trick here was to notice that the question refers to total revenue and not normal profit
thekobe yes, revenue is related only to output, it does not includes costs, thats the trick
choas69 if you make a mistake here you're learning, keep going.
MathLoser TR = P x Q
Example: P =$5 . Q = 10.

5 x 10 = 50.
5 x 11 = 55 (+10%)
5 x 12 = 60 (+9%)
5 x 13 = 65 (+8.3%)
5 x 14 = 70 (+7.69%)

I'm lost with this question.
10425406 the rate is constant because the marginal increase in TR is 5 for every single increase in output/quantity
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