Revenue

Question 1

TR calculation

Answer 1

P X Q

Question 2

AR calculation

Answer 2

TR/Q

AR=P

Question 3

why does AR = P

Answer 3

becuase TR - P*Q / Q = Q so Qs cancel out

Question 4

Marginal Revenue meaning

Answer 4

extra revenue gained when we sell one more output

Question 5

Marginal Revenue equation

Answer 5

change in TR / change in Q

Question 6

Revenue depedns on

Answer 6

level of competition

Question 7

what are the two types of competition

Answer 7

perfect

imperfect

Question 8

state the conditions of perfect comp

Answer 8

many buyers and sellers( infinite (extreme))

homogenous goods and services
therefore

firms are price takers

No barriers to entry/exit

Perfect information about market condiitons

Question 9

insane comp means firms are price takers what does this mean

Answer 9

regardles of number of units being sold

always sold at same price

Question 10

AR and MR are

Answer 10

same and constant over range of ouptut

Question 11

what are the axis on the perfect/imp comp rev groahs

Answer 11

y axis -price/revenue
x axis - quantity

Question 12

Draw + describe how an AR and MR curve look

Answer 12

constant horizontal line

AR=MR=D

Question 13

draw + describe+ explain how TR curve looks

Answer 13

linear upward sloping line

TR always increases by * so therefore linear upward sloping line shows constant gradient
i.e always increaseing by x

Question 14

State assumptions of imperfect competiton

Answer 14

few buyers and sellers

all sell differentiated products
therefore

price makers

more brarriers to entry and exit

imperfect info of mkt conditions

Question 15

How is the price set in imperfect competition

Answer 15

firms are price makers so charge diffrerent pries

Question 16

in imperfect comp firms are price makers so charge different prices what is this goverend by

Answer 16

low of diminsihing utility

Question 17

IMPCOMP firms price makers so charge diff prices which are governed by law of diminishing utility so what happens when theres changes in price

Answer 17

high price - low q sold
low price - high q solf

Question 18

Draw AR and MR curves + describe

Answer 18

ar downward sloping
MR downward sloping but 2x as a steep as AR

Question 19

Why is AR downard sloping

Answer 19

cause = to D curve

Question 20

Describe + draw TR curve

Answer 20

rises but at slower rate each time

because MR’s falling
when hits peak decreases

TR must iht pek when MR=0

Question 21

When is TR maximised

Answer 21

MR = 0

Question 22

Explain why TR is not maximised when MR is -ve

Answer 22

When MR-ve TR is decreasing so all extra units generated with –ve revenue so TR is decreasing so not being maxed

Question 23

Explain why TR is not maximised when MR is +VE

Answer 23

producing one more unit always provide more revenue
therefore TR will keep rising

rate at which it’s rising will be falling because MR decreases

but TR always increaisng as long as MR is +Ve

so point TR maxed is when theres no more extra revenue to be made i.e MR=0

Question 24

any point to left of peak of TR under MR curve is not maxing TR why

Answer 24

MR is +ve