Assume That Burger King, a Fast Food Chain, Enters into a Franchise

Multiple Choice

Assume that Burger King, a fast food chain, enters into a franchise agreement. The royalty paid to Burger King by the franchisee is calculated as a percentage of the franchisee's revenue. Given that the franchisee faces a downward-sloping demand curve, which of the following is likely to be true?

A) The franchisee's revenue-maximizing output will be greater than its profit-maximizing output.
B) To maximize revenue, Burger King will want the franchisee to produce at the level where total revenue is positive but falling.
C) The franchisee will produce at the level where the slope of the total revenue curve is zero in order to maximize profits.
D) The profit-maximizing level of output for the franchisee will be at the level where marginal revenue is less than marginal cost.
E) To maximize revenue, Burger King will want the franchisee to produce at the level where marginal revenue equals marginal cost.