Final answer:
The statement is false; lowering the price in a competitive market could increase quantity sold, but total revenue would only increase if the demand is elastic. The firm maximizes profit where marginal cost equals marginal revenue.
Step-by-step explanation:
The statement is false. Assuming Femi's Hooknladder is a competitive firm, decreasing the price from $80,000 to $60,000 would likely increase the quantity sold due to the law of demand. However, whether total revenue increases or decreases depends on the price elasticity of demand.
Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. If the demand is elastic, total revenue will increase with a price decrease. If the demand is inelastic, total revenue will decrease with a price decrease.
In the given examples, we analyze the relationship between production quantity, marginal revenue, and marginal cost. A firm maximizes profit by producing up to the point where marginal cost equals marginal revenue. If the firm lowers the price and continues to produce the same amount or more despite experiencing higher marginal costs than marginal revenues, it will see a decrease in total revenue and profits.
In scenarios where the total revenue line is completely below the total cost curve at every level of output, the firm suffers losses. Hence, a profit-maximizing firm would attempt to minimize these losses by choosing a production quantity where the difference between total revenue and total costs is the smallest.