Question

When the market price is P3, a profit-maximizing firm's total revenue:

a. can be represented by the area P3 × Q3.
b. can be represented by the area P3 × Q2.
c. can be represented by the area (P3-P2) × Q3.
d. is zero.

Answer 1

Option (b) is correct.

Step-by-step explanation:

The total revenue can be determined by multiplying price of the good with quantity of goods sold. At price, P3, a profit maximizing firm's total revenue is at a point where the marginal cost is equal to the average total cost which is at a point Q2 quantity of goods sold and it is represented by the area :

P3 × Q2

Note: The figure is missing in this question, so I attached the figure with the answer.