True or False: If Larry's Fire Engines were a competitive firm instead and $80,000 were the market price for an engine, decreasing its price from $80,000 to $40,000 would result in a decrease in the production quantity, but an increase in total revenue.

In this case, the answer would be True or the total revenue of Larry's Fire Engines would have increased if it decreased its price as mentioned.

Explanation:

A perfectly competitive market is characterized by many or numerous sellers and buyers or consumers with no legal or administrative barriers to entry or exit for any individual firm or seller. Absence of any barriers of entry or exit along with the presence of many or numerous firms or companies in the market ideally signify high market competition or rivalry and consequently, individual firms or sellers has no control over market price determination for the concerned product or service. Therefore, all the firms or sellers in the market are basically price takers. The presence of many sellers or firms selling identical products also indicates that the buyer or consumer demand for goods and services in a perfectly competitive market is usually elastic, implying that consumers or buyers are generally more or highly responsive or sensitive about any change in price of respective goods or services. Hence, considering the aforementioned characteristics of perfectly competitive market, a decrease in price by Larry's Fire Engines will presumably attract more number of consumers or buyers to purchase its products or services, assuming that the prices offered by other firms or companies in the market remain constant or fixed at the previous level. Therefore, higher price elasticity of demand of consumers or buyers in a competitive market would attract more customers for Larry's Fire Engines thereby expanding their total revenue even if the production level dips initially due to lower price level.