To determine whether lowering the price will increase or decrease revenue, we need to consider the price elasticity of demand. Without knowing the elasticity, we can only discuss the possibilities.

If demand is elastic: Lowering the price will likely increase total revenue. The increase in quantity demanded will be greater than the decrease in price, resulting in a higher total revenue.

For example, if the firm lowers the price to £8 per unit, the quantity demanded might increase to 120 units. The new total revenue would be 120 x £8 = £960, which is higher than the original £1000.

If demand is inelastic: Lowering the price will likely decrease total revenue. The increase in quantity demanded will be less than the decrease in price, resulting in a lower total revenue.

For example, if the firm lowers the price to £8 per unit, the quantity demanded might only increase to 105 units. The new total revenue would be 105 x £8 = £840, which is lower than the original £1000.

Conclusion: The firm needs to estimate the price elasticity of demand for its product. If the elasticity is elastic, lowering the price is likely to increase revenue. If the elasticity is inelastic, lowering the price is likely to decrease revenue. The firm should conduct market research to estimate the elasticity before making a decision.

In a perfectly competitive market, a firm faces a horizontal demand curve because it is a price taker. This means that the firm can sell any quantity it wants at the prevailing market price, but it cannot influence the market price itself. The market price is determined by the forces of supply and demand, and the individual firm must accept this price.

This directly affects the firm's ability to set its price. Since it's a price taker, the firm cannot charge a price higher than the market price without losing all its sales. Therefore, the firm's demand curve is perfectly elastic (horizontal).

Because the demand curve is horizontal, the average revenue (AR) is equal to the market price. This is because the firm will receive the same price for every unit it sells, regardless of the quantity. The firm's ability to earn a profit is limited in the long run because it has no control over the price and must operate at the prevailing market price.

Calculation of AR:

AR = Total Revenue / Quantity

AR = £500 / 100 = £5

Calculation of ATC at 150 units:

First, we need to calculate the total cost (TC) at 100 units. We know that TR = P x Q, so P = TR/Q = £500/100 = £5. Therefore, TC = Fixed Cost + Variable Cost. Since TR = P x Q, and P = £5, then Q = TR/P = 100/5 = 20. Therefore, Variable Cost = Total Cost - Fixed Cost = £100 - £20 = £80. The variable cost per unit is £80/100 = £0.80. The total cost at 100 units is £100 + (£0.80 x 100) = £180. The average total cost at 100 units is £180/100 = £1.80. However, the question asks for the ATC at 150 units. We need to know the total cost at 150 units. We can assume a constant marginal cost. Since the variable cost per unit is £0.80, the total variable cost at 150 units is £0.80 x 150 = £120. Therefore, the total cost at 150 units is £100 + £120 = £220. The ATC at 150 units is £220/150 = £1.47 (approximately). Alternatively, we can calculate the ATC at 100 units as £1.80. If the variable cost per unit is constant, then the ATC will be lower at 150 units. However, without more information, we cannot be certain of the exact ATC at 150 units.