Chapter 3.3 - Calculating the Revenue of a Firm

Question 1

Explain revenues in perfectly and imperfectly competitive markets.

Answer 1

In perfectly competitive markets, AR=MR=P (constant).

In imperfectly competitive markets, MR>0 (elastic), MR

Question 2

Define:

i) profit
ii) total revenue
iii) average revenue
iv) marginal revenue

Answer 2

i) profit = TR-TC
ii) TR = PQ
iii) AR = TR/Q = PQ/P = P
iv) MR = TR2-TR1/Q2-Q1