3.3.1 - Revenue Flashcards
1
Q
Total revenue formula
A
Price x Quantity
2
Q
Average revenue
A
Total revenue/Quantity
(In other words AR = Price)
3
Q
Marginal revenue formula
A
Change in TR (total rev)/Change in quantity
4
Q
Blurt everything you know about perfect competition (draw diagram)
A
- In perfectly competitive markets, firms have no setting power.
- Every unit of output is sold at the same price.
- A higher price would decrease sales to zero.
- A lower price would result in all sellers lowering their price
- TR is upwards sloping because price is constant, so the more goods that are sold the higher Total revenue is.
- MR = AR = Demand
- Demand is perfectly elastic
5
Q
The Relationship Between TR, AR & MR In Perfect Competition - Numerically
A
6
Q
The Relationship Between TR, AR & MR For Imperfect Competition - Numerically
A
7
Q
Blurt everything you know about Imperfect competition (draw diagram)
A
- As quantity increases, both average revenue and marginal revenue decrease.
- When the AR falls, the MR falls by twice as much
The gradient of the MR curve is twice as steep as the AR curve. - At a certain maximization takes place as marginal revenue is equal to 0 at this point the total revenue curve is also at its highest. - When MR = 0, then the price elasticity of demand (PED) = 1
This is unitary elasticity - After this point the total revenue line starts to decrease after this point.
8
Q
A
9
Q
Revenue curves for perfect comp
A
10
Q
imperfect comp Tr and Mr curve
A
