Revenue & Profit Flashcards
(8 cards)
What is the Total Revenue?
Quantity sold x price; TR = Q x P
What is the Average Revenue?
Revenue per unit sold; AR = TR
What is Marginal Revenue?
The change in TR when one more unit is sold
MR = change in TR/change in Q
What is a Price Maker?
Firm with some market power that can alter prices
What is a Price-Taker?
A firm with no market power, selling at the market price only
What is Normal Profit?
The profit that the firm could make by using its resources in their next best use; it is the profit needed to keep the firm in business; it is effectively a cost of production.
Normal profit is earned when TR=TC
What is Supernormal Profit?
Also called abnormal profit; any profit over and above normal profit
SNP exists when TR>TC
What is the Formula for Profit Maximisation?
MC=MR
