Total, average and
marginal revenue
What is total revenue?
What is average revenue?
What is marginal revenue ?
QUESTION
Total revenue = the amount of money a firm receives.
Selling price (P) X quantity sold (Q)
Or
Average revenue/quantity
Average revenue = price per unit.
The average revenue is the same as the demand curve.
Total revenue/ quantity
Marginal revenue = the change in total revenue from selling
one more unit of output.
Change in total revenue/ change in quantity
ANSWER
, Price taker
What is a price taker?
What is the shape of a price takers AR and MR curve?
Why is the AR curve horizontal?
What is the shape of a price takers TR curve?
QUESTION
PRICE TR
REVENUE
AR MR
=
P1
& ty &ty
A price taker faces a horizontal AR (demand)
curve, which is perfectly elastic. The MR is Each unit is sold at the same price.
horizontal and is equal to the AR. This is because Therefore, its TR curve will be a straight
the price for the good remains constant. line drawn through the origin.
A price taker operates in a perfectly competitive market has no market power and must
accept the market determined price.
ANSWER
, Price maker
AR and MR
What is a price maker/setter?
Why is a price markers AR curve downward sloping?
Where is total revenue maximised?
QUESTION
Price makers operate in a imperfectly competitive market and so have some price setting power.
PR155
A price maker faces a downward sloping AR (demand) curve, as price
decreases as output increases.
For a firm that is a price maker,
the MR curve is downward
DI.------------------- sloping. When AR falls MR falls
E
by twice as much so it has a
gradient twice as steep as the
AR curve.
AR
MR
Total revenue is maximised where
QUANTITY
L MR = O, this is the mid point of the
Revenue max: MR = 0 demand curve where PED = 1.
ANSWER
marginal revenue
What is total revenue?
What is average revenue?
What is marginal revenue ?
QUESTION
Total revenue = the amount of money a firm receives.
Selling price (P) X quantity sold (Q)
Or
Average revenue/quantity
Average revenue = price per unit.
The average revenue is the same as the demand curve.
Total revenue/ quantity
Marginal revenue = the change in total revenue from selling
one more unit of output.
Change in total revenue/ change in quantity
ANSWER
, Price taker
What is a price taker?
What is the shape of a price takers AR and MR curve?
Why is the AR curve horizontal?
What is the shape of a price takers TR curve?
QUESTION
PRICE TR
REVENUE
AR MR
=
P1
& ty &ty
A price taker faces a horizontal AR (demand)
curve, which is perfectly elastic. The MR is Each unit is sold at the same price.
horizontal and is equal to the AR. This is because Therefore, its TR curve will be a straight
the price for the good remains constant. line drawn through the origin.
A price taker operates in a perfectly competitive market has no market power and must
accept the market determined price.
ANSWER
, Price maker
AR and MR
What is a price maker/setter?
Why is a price markers AR curve downward sloping?
Where is total revenue maximised?
QUESTION
Price makers operate in a imperfectly competitive market and so have some price setting power.
PR155
A price maker faces a downward sloping AR (demand) curve, as price
decreases as output increases.
For a firm that is a price maker,
the MR curve is downward
DI.------------------- sloping. When AR falls MR falls
E
by twice as much so it has a
gradient twice as steep as the
AR curve.
AR
MR
Total revenue is maximised where
QUANTITY
L MR = O, this is the mid point of the
Revenue max: MR = 0 demand curve where PED = 1.
ANSWER
