A perfectly competitive firm faces a demand curve that is infinitely elastic.
Total revenue equals the market price times the quantity the firm chooses to produce and sell.
A monopolist's total revenue can be graphed as in Figure 1, in which Price (P) is the height of the box, and Quantity (Q) is the width.
The quantity of apples demanded drops as the price increases, which leads to the changes of the total revenue.
The function of TR is graphed as a downward opening parabola due to the concept of elasticity of demand.
Whether the total revenue will grow or drop depends on the original price and quantity and the slope of the demand curve.
The percentage change in the price and quantity determine whether the demand for a product is elastic or inelastic.
In the long run, a similar rule also can be applied when a firm needs to decide whether it should enter or exit a market.