2. revenue Flashcards
1
Q
define total revenue
A
price x number of units sold
2
Q
define average revenue and its shape
A
total revenue/output (downwards sloping)
3
Q
define marginal revenue and its shape
A
extra revenue gained from selling one extra unit (downwards sloping, 2 times as steep as AR)
4
Q
what is diminishing marginal utility
A
in order to get more customers to purchase a product, prices have to be lowered to attract these customers, as a result marginal revenue is downwards sloping as the extra revenue gained, is less each time due to having to reduce prices
5
Q
when is profit maximized
A
when MC=MR
6
Q
why does the AC curve shaped like that
A
first half - economies of scale
second half - diseconomies of scale
