To maximize revenue, a firm will set its price at which point of the demand curve?

To maximize revenue, a firm should set its price at the unit elastic point of the demand curve. This is because, at this point, the percentage change in quantity demanded is exactly equal to the percentage change in price. As a result, total revenue, which is calculated by multiplying price by quantity sold, reaches its maximum.

When the firm operates at the unit elastic point, any increase in price will lead to a proportionate decrease in quantity demanded, leaving total revenue unchanged. Conversely, a decrease in price will result in a proportionate increase in quantity demanded that also maintains total revenue. This unique property of the unit elastic point allows the firm to achieve the highest possible revenue level since any movement from this point—either up or down the price—will result in a reduction in total revenue.

Additionally, the demand curve has distinct characteristics depending on its elasticity at various points. At points where demand is elastic, decreasing price enhances total revenue, while at inelastic points, increasing price boosts revenue. Therefore, the unit elastic point is crucial because it indicates the optimal intersection where revenue is maximized before shifts in elasticity begin to affect total revenue negatively.