3.3.1 Revenue

Question 1

Define revenue?

Answer 1

Revenue is the money earned from the sale of goods and services.

Question 2

Define total revenue?

Answer 2

This is the total amount of money coming into business through the sale of goods and services.

Question 3

calculate average revenue?

Answer 3

demand is equal to AR, total revenue/output

Question 4

define marginal revenue?

Answer 4

The extra revenue that the firm earns from selling one more unit of production.

Question 5

If some firms have perfect competition what will impact them?

Answer 5

If some firms experience perfect competition, they will have no setting power and don’t set prices which means AR=MR=D are all the same.

Question 6

For perfect competition as output increases, what happens to prices?

Answer 6

This means there will be a inverse relationship because prices will decrease. This means it has a downward sloping curve as firms that are in imperfect competition and they have price setting power.

Question 7

Why does TR have a downward ‘c’ shape curve downward?

Answer 7

The price elasticity is heavily influenced with out marginal revenue is shaped.

1. When MR is positive the firm will sell the product at a lower price and therefore total revenue is growing so demand is price elastic.
2. Then MR will start becoming negative so total revenue will decrease therefore demand is price-inelastic.
3. Then MR=0 so TR will be maximized as the demand curve will now be unitary elastic.