3.3.1

Question 1

Formula for total revenue

Answer 1

Price* quantity sold
The revenue received from the sale of a given level of output

Question 2

Marginal revenue

Answer 2

This is the extra revenue a firm earns from the sale of one extra unit
When marginal revenue is 0, TR is maximised

Question 3

Average revenue

Answer 3

Average receipt per unit
TR/Qsold
AR curve is the firms demand curve
In markets where firms are price takers, the AR curve is horizontal
I’m markets where firms are price makers, the AR curve is downward sloping

Question 4

PED and it’s relationship to revenue concepts

Answer 4

In markets where firms are price takers, the AR curve is horizontal
Because price received for the good is constant
AR= demand curve
AR= marginal revenue

Question 5

Why is the AR curve usually downward sloping

Answer 5

Because the price per unit is reduced as extra units are sold