3.3 revenue and profit Flashcards
1
Q
what is average revenue?
A
AR = total revenue/output
price per unit
demand curve
2
Q
what is marginal revenue?
A
the change in revenue from selling one extra unit of output
MR = change in revenue / change in quantity
3
Q
where does maximum total revenue occur?
A
where marginal revenue is zero
MR=0
directly under the midpoint of AR
when MR=0 PED=1
4
Q
what is accounting profit?
A
total revenue-total explicit costs
5
Q
what is economic profit?
A
accounting profit-opportunity costs
6
Q
what is normal profit?
A
P=AC (AR=AC)
the minimum profit needed to keep factor inputs in their current use in the longrun.
7
Q
what is supernormal profit?
A
P>AC (AR>AC)
profit achieved in excess of normal profit
8
Q
what is a loss?
A
P<AC (AR<AC)
the firm is selling the product for less than the average total cost.
