3.3.1

Question 1

what is total revenue + formula ?

Answer 1

total money a firm earns from selling a certain quantity of goods and services at a given price
* TR = P * Q

Question 2

What is average revenue + formula?

Answer 2

aka price
the revenue generated from each unit sold
* AR=TR/Q

Question 3

What is marginal revenue +formula?

Answer 3

the additional revenue generated by selling one more extra unit
* MR = ΔTR / ΔQ

Question 4

what is the relationship between PED and revenue?

Answer 4

if inelatic then increasing price will increase revenue becuase the percentage decrease in quantity sold is smaller than the percentage increase in price.

Question 5

what is marginal cost + formula?

How does MC relate to ATC

Answer 5

the additional cost per each unit produced
* MC = ΔTC / ΔQ
* When MC is less than ATC, ATC is decreasing.
* When MC is greater than ATC, ATC is increasing.
* When MC is equal to ATC, ATC is at its minimum point.

Question 6

what does the law of diminshing returns state?

define short run

Answer 6

(only applies in short run)
* as more units of a variable factors of production are added to fixed amounts of factors of production, the total/marginal product will at first rise and then fall

time period where at least one factor of production is fixed

Question 7

what is the relationship between short run and long run cost curves?