Revenue and Profit

Question 1

business revenue definition?

Answer 1

the income generated from selling goods and services

Question 2

Total revenue = ?

Answer 2

price per unit x quantity sold

Question 3

When will business revenues rise?

Answer 3

• firm can charge a higher price
• a business grows their customer base
• enterprise widens product range and opens more outlets
• business with elastic demand lowers price

Question 4

average revenue = ?

Answer 4

total revenue / output

Question 5

what is marginal revenue?

Answer 5

the addition to total revenue resulting from the sale of one more unit of output

Question 6

With an inelastic demand curve, an increase in price will?

Answer 6

cause revenue to increase

Question 7

With an inelastic demand curve a decrease in price will cause revenue to?

Answer 7

fall

Question 8

with an elastic demand curve an increase in price will cause revenue to?

Answer 8

fall

Question 9

with an elastic demand curve a decrease in price will casuse total revenue to?

Answer 9

increase

Question 10

What is supernormal profit?

Answer 10

differance between total revenue and total costs

Question 11

How do you calculate supernormal profit?

Answer 11

TR - TC

Question 12

What is normal profit

Answer 12

a cost of production

Question 13

What are the four reasons why profit is important ?

Answer 13

• finance for capital investment and research
• market entry
• demand for and flow of factor resources
• signals about health of economy

Question 14

What are market structures?

Answer 14

refers to number of firms within an industry and the way in which those businesses behave

Question 15

Give the spectrum of competition for market structures, starting with least?

Answer 15

• monopoly, duopoly, oligopoly, monopolistic competition, perfect competition

Question 16

What is the criteria for catergorising industries into market structures?

Answer 16

• how many firms are competing in market
• how differentiated are the products
• how easily can new firms enter the market

Question 17

Give examples of industries that are monopolys?

Answer 17

• water companies
• search engines
• zip manufacturing

Question 18

Give examples of oligopolys?

Answer 18

• train operators
• supermarkets
• mobile phone networks
• cinemas

Question 19

Give examples of monopolistic competition?

Answer 19

• football clubs
• restraunts
• tv channels
• pubs
• hairdressers

Question 20

Give examples of perfect competition?

Answer 20

• stock market
• fruit + veg
• eggs
• street food in developing countires

Question 21

What does the concentration ratio tell us?

Answer 21

• number of firms that dominate in a market

Question 22

How do you calculate the concentration ratio?

Answer 22

• for 3 firm concentration ratio –> add up market share for three largest firms in that industry

Question 23

Characteristics of monopoly markets?

Answer 23

• large barriers to entry
• single firm dominates market
• limited number of products
• able to set prices

Question 24

Characteristics of monopolistically competitive markets?

Answer 24

• large number of firms with little market power
• slightly differentiated products
• low number of barriers to entry
• price dictated by market

Question 25

Explain characteristics of oligopolistic markets?

Answer 25

- few firms dominate market - products are differentiated - large barriers to entry - firm can set price in market to some extent - makes large use of advertising

Question 26

Explain the characteristics of perfectly competitive markets?

Answer 26

- infinite number of firms, little market power - homogenous products ( identical) - no barriers to entry - prices dictated by market - no advertising necersarry

Question 27

What are objectives of firms?

Answer 27

- long term goals which determine the guiding principles of a business

Question 28

What can objectives be broken down into?

Answer 28

- short and medium term aims

Question 29

What are the four types of objectives ?

Answer 29

- profit maximisation - profit satisficing - revenue maximisation - sales maximisation

Question 30

What is profit maximisation?

Answer 30

- firms seek to attain highest level of profit available

Question 31

WHat is profit satisficing?

Answer 31

a profit is wanted that satisfies the needs of the owners or managers of an organisation

Question 32

What is revenue maximisation ?

Answer 32

firm will seek to maximise sales revenue - occur at point where marginal revenue = 0

Question 33

What else will firms try and achieve ?

Answer 33

- survival - growth (through opening new stores or merger / takeover) - increase market share

Question 34

What does achaiveing the additional targets depend on?

Answer 34

- government businesses wanting to supply a service - worker cooperatives look to benefit their members - producer cooperatives might look to gain economies of scale with smaller firms joining together