3.3-Revenue and profit Flashcards
What is total revenue?
Total revenue is the total income generated from the sale of goods or services.
How is total revenue calculated?
Total revenue is calculated by multiplying the price per unit by the quantity sold.
What is marginal revenue?
Marginal revenue is the additional revenue gained from selling one more unit of a good or service.
True or False: Marginal revenue decreases as more units are sold in a competitive market.
True
What is the relationship between price elasticity of demand and total revenue?
If demand is elastic, an increase in price leads to a decrease in total revenue, and vice versa.
What does the term ‘profit’ refer to?
Profit refers to the financial gain after all costs and expenses have been subtracted from total revenue.
How is profit calculated?
Profit is calculated by subtracting total costs from total revenue.
What are fixed costs?
Fixed costs are costs that do not change with the level of output, such as rent and salaries.
What are variable costs?
Variable costs are costs that vary with the level of output, such as materials and labor.
Fill in the blank: Average revenue is equal to total revenue divided by _______.
quantity sold
What is the formula for calculating average profit?
Average profit is calculated by dividing total profit by the quantity sold.
True or False: A firm can have positive total revenue but still incur a loss.
True
What is economic profit?
Economic profit is the difference between total revenue and total costs, including both explicit and implicit costs.
What is the break-even point?
The break-even point is the level of output at which total revenue equals total costs, resulting in zero profit.
What happens to profit when a firm increases its output in the short run?
Profit may increase if marginal revenue exceeds marginal cost.
What is the relationship between average total cost and profit?
If price is greater than average total cost, the firm earns a profit; if price is less, the firm incurs a loss.
What does a downward-sloping demand curve indicate about marginal revenue?
A downward-sloping demand curve indicates that marginal revenue decreases as quantity sold increases.
What is price discrimination?
Price discrimination is charging different prices to different consumers for the same good or service.
Fill in the blank: The total revenue curve is _______ when demand is elastic.
upward sloping
What is the impact of increased competition on prices and profits?
Increased competition typically lowers prices and can reduce profits.
What is a monopoly?
A monopoly is a market structure where a single seller dominates the market with no close substitutes.
What is the profit-maximizing level of output?
The profit-maximizing level of output occurs where marginal cost equals marginal revenue.
True or False: Economies of scale can lead to increased profitability.
True
What is a loss?
A loss occurs when total costs exceed total revenue.
