3.3 Revenue, Costs and Profit

Question 1

Total revenue definition and equation

Answer 1

total value of all sales
selling price x qty sold

Question 2

Average revenue definition and equation

Answer 2

overall revenue per unit
total revenue/qty

Question 3

Marginal revenue definition and equation

Answer 3

Extra revenue gained from selling another unit

change in TR/ change in Q

Question 4

Short Run Cost Curves (Short run, Long run, marginal product of labour, law of diminishing productivity)

Answer 4

Short Run- When at least one factor of production is fixed- e.g. no. of factories can be difficult to change in the short run

Long run- all factors of production are variable

Marginal product of labour- change in output from an additional unit of labour

Question 5

What is the constant returns to scale point

Answer 5

when the firm are operating at the minimum efficiency point-> if growth continues they may face diseconomies of scale

Question 6

6 types of economies of scale

Answer 6

Financial
Managerial
Marketing
Purchasing
Technical
Risk-bearing