Final answer:
Total revenue is maximized at a quantity where marginal revenue equals marginal cost, not necessarily at the highest or lowest price, or where price equals cost or is dictated by demand alone.
Step-by-step explanation:
Total revenue is maximized not at the highest or lowest price, but at a level where the price and quantity produced meet specific economic conditions. For a perfectly competitive firm, total revenue steadily increases with the quantity of output at a constant rate determined by the market price. The maximum profit, or the smallest loss, occurs where total revenues exceed total costs by the greatest amount, which coincides with where marginal revenue (MR) equals marginal cost (MC). For a monopolist, this principle also holds true, and the profit-maximizing quantity is identified where MR = MC.
In the scenario where price drops below total costs at all levels of output, a firm faces losses. However, to minimize those losses or maximize revenue, the firm should still produce at a quantity where MR = MC. This foundational principle of nonprofit-maximizing firms holds true across market structures, whether perfectly competitive or monopolistic. The optimum level of output is never at the point where price is equal to cost or when price is entirely dictated by demand without considering the costs.