Revenue and Profit

Question 1

What is total revenue?

Answer 1

The revenue received by a firm from its sales of a good or service it is the quantity sold, multiplied by the price

Question 2

What is average revenue?

Answer 2

The average revenue received by the firm per unit of output; it is total revenue divided by quantity sold

Question 3

What is marginal revenue?

Answer 3

The additional revenue received by the firm if it sells an additional unit of output

Question 4

To the left of midpoint PED is what?

Answer 4

Elastic (price decreases lead to a proportionately larger increase in quantity demanded - total revenue increases as price falls)

Question 5

To the right of midpoint PED is what?

Answer 5

Inelastic (price decreases lead to a proportionately smaller increase in quantity demanded - total revenue decreases as price falls)

Question 6

With a perfectly elastic demand curve…

Answer 6

… AR=MR

Question 7

How to work out profit?

Answer 7

TR-TC=Profit

Question 8

What is normal profit?

Answer 8

The return needed for a firm to stay in a market in the long run

Question 9

What are supernormal profits?

Answer 9

Profits above normal profits

Question 10

If the accounting profit is lower than opportunity cost, the firm…

Answer 10

… would be better off using their resources elsewhere; they would leave the market

Question 11

Profit maximisation

Answer 11

MC=MR