Revenue

Question 1

What do you understand by revenue?

Answer 1

It is the amount received by a firm from the sale of a given commodity in the market.

Question 2

What is TR?

Answer 2

It refers to total revenue. Total revenue refers to total receipts from sale of given commodity.
TR = P x Q

Question 3

What is AR?

Answer 3

AR is average revenue. It is the revenue per unit of output sold.
AR = TR/Q

Question 4

What are the 2 features of AR?

Answer 4

1. AR= Price
2. AR is also known as demand curve.

Question 5

Area under AR curve gives _______

Answer 5

TR

Question 6

Why is AR curve downward sloping?

Answer 6

AR curve is also known as the demand curve and hence is downward sloping. This is because according to law of demand, if you want to sell more, you have to reduce the price and AR is equal to price.

Question 7

What is MR?

Answer 7

It is the additional revenue generated from sale of additional unit of output.
MR= Change in TR/ Change in Q
OR
MR= New TR - Old TR

Question 8

What is the behaviour of AR and MR under perfect competition?

Answer 8

Under perfect competition, AR is obviously constant because price remains constant. The same case is with MR. Under a perfect competition, AR is equal to MR. MR is also constant.

Question 9

Under perfect competition MR and AR graph is?

Answer 9

Parallel to X axis

Question 10

In perfect competition, if MR is constant, then what happens to TR?

Answer 10

In perfect competition, TR increases at constant rate

Question 11

What is the curve of TR in perfect competition?

Answer 11

TR curve is positively slope straight line

Question 12

Why does the TR curve start from origin?

Answer 12

Since TR is zero at zero level of output, the curve starts from origin

Question 13

Area under AR/MR curve is equal to what?

Answer 13

TR

Question 14

When price falls with the rise in output, what is called?

Answer 14

Imperfect competition

Question 15

In imperfect competition _______ falls with increase in sales

Answer 15

AR/price

Question 16

In imperfect competition to increase our sales, we have to do what?

Answer 16

To increase our sales, we have to lower our price according to law of demand

Question 17

In imperfect competition ______ and _______ fall

Answer 17

MR and AR

Question 18

In imperfect competition _____>______

Answer 18

AR > MR

Question 19

Why does MR fall faster than AR?

Answer 19

MR fall faster than AR because each time you sell an additional unit, you have to lower the price even more.

Question 20

Two features of the MR and AR curve?

Answer 20

MR curve can positive zero and negative.
AR curve remains positive

Question 21

When does AR increase? (General relation between MR and AR)

Answer 21

As long as MR is higher than AR

Question 22

When does AR fall? (General Relation)

Answer 22

When MR is less than AR (MR<AR)

Question 23

When is AR maximum and constant?

Answer 23

When AR = MR

Question 24

When MR falls AR also falls but _____

Answer 24

Fall in MR is more than fall in AR

Question 25

Which curve is steeper, MR or AR?

Answer 25

MR

Question 26

When MR is positive, TR?

Answer 26

Increases

Question 27

When TR is maximum, MR?

Answer 27

0

Question 28

When TR rises, MR?

Answer 28

Positive

Question 29

When MR is negative, TR?

Answer 29

Falls

Question 30

MR can be zero or negative in perfect competition . True or false?

Answer 30

False

Question 31

Total cost is the sum of marginal cost. True or false?

Answer 31

False