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Economics A-level > Revenue and Profit > Flashcards

Revenue and Profit Flashcards

1
Q

business revenue definition?

A

the income generated from selling goods and services

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2
Q

Total revenue = ?

A

price per unit x quantity sold

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3
Q

When will business revenues rise?

A
  • firm can charge a higher price
  • a business grows their customer base
  • enterprise widens product range and opens more outlets
  • business with elastic demand lowers price
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4
Q

average revenue = ?

A

total revenue / output

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5
Q

what is marginal revenue?

A

the addition to total revenue resulting from the sale of one more unit of output

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6
Q

With an inelastic demand curve, an increase in price will?

A

cause revenue to increase

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7
Q

With an inelastic demand curve a decrease in price will cause revenue to?

A

fall

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8
Q

with an elastic demand curve an increase in price will cause revenue to?

A

fall

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9
Q

with an elastic demand curve a decrease in price will casuse total revenue to?

A

increase

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10
Q

What is supernormal profit?

A

differance between total revenue and total costs

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11
Q

How do you calculate supernormal profit?

A

TR - TC

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12
Q

What is normal profit

A

a cost of production

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13
Q

What are the four reasons why profit is important ?

A
  • finance for capital investment and research
  • market entry
  • demand for and flow of factor resources
  • signals about health of economy
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14
Q

What are market structures?

A

refers to number of firms within an industry and the way in which those businesses behave

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15
Q

Give the spectrum of competition for market structures, starting with least?

A
  • monopoly, duopoly, oligopoly, monopolistic competition, perfect competition
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16
Q

What is the criteria for catergorising industries into market structures?

A
  • how many firms are competing in market
  • how differentiated are the products
  • how easily can new firms enter the market
17
Q

Give examples of industries that are monopolys?

A
  • water companies
  • search engines
  • zip manufacturing
18
Q

Give examples of oligopolys?

A
  • train operators
  • supermarkets
  • mobile phone networks
  • cinemas
19
Q

Give examples of monopolistic competition?

A
  • football clubs
  • restraunts
  • tv channels
  • pubs
  • hairdressers
20
Q

Give examples of perfect competition?

A
  • stock market
  • fruit + veg
  • eggs
  • street food in developing countires
21
Q

What does the concentration ratio tell us?

A
  • number of firms that dominate in a market
22
Q

How do you calculate the concentration ratio?

A
  • for 3 firm concentration ratio –> add up market share for three largest firms in that industry
23
Q

Characteristics of monopoly markets?

A
  • large barriers to entry
  • single firm dominates market
  • limited number of products
  • able to set prices
24
Q

Characteristics of monopolistically competitive markets?

A
  • large number of firms with little market power
  • slightly differentiated products
  • low number of barriers to entry
  • price dictated by market
25
Q

Explain characteristics of oligopolistic markets?

A
  • few firms dominate market
  • products are differentiated
  • large barriers to entry
  • firm can set price in market to some extent
  • makes large use of advertising
26
Q

Explain the characteristics of perfectly competitive markets?

A
  • infinite number of firms, little market power
  • homogenous products ( identical)
  • no barriers to entry
  • prices dictated by market
  • no advertising necersarry
27
Q

What are objectives of firms?

A
  • long term goals which determine the guiding principles of a business
28
Q

What can objectives be broken down into?

A
  • short and medium term aims
29
Q

What are the four types of objectives ?

A
  • profit maximisation
  • profit satisficing
  • revenue maximisation
  • sales maximisation
30
Q

What is profit maximisation?

A
  • firms seek to attain highest level of profit available
31
Q

WHat is profit satisficing?

A

a profit is wanted that satisfies the needs of the owners or managers of an organisation

32
Q

What is revenue maximisation ?

A

firm will seek to maximise sales revenue

  • occur at point where marginal revenue = 0
33
Q

What else will firms try and achieve ?

A
  • survival
  • growth (through opening new stores or merger / takeover)
  • increase market share
34
Q

What does achaiveing the additional targets depend on?

A
  • government businesses wanting to supply a service
  • worker cooperatives look to benefit their members
  • producer cooperatives might look to gain economies of scale with smaller firms joining together

Economics A-level (35 decks)

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