Revenue And Profit Flashcards
1
Q
Average revenue
A
Total revenue
—————-
Output
2
Q
Marginal revenue
A
Change in total revenue
——————————-
Change in quantity
3
Q
Total revenue
A
Price x Quantity
4
Q
PED equation
A
% change in QD
——————
% change in Price
5
Q
MR = 0
A
PED = 1
6
Q
Normal profit
A
The minimum amount needed to keep factor inputs in their current use in the long run (AR=AC)
7
Q
Subnormal profit
A
• Loss making
• AR < AC
8
Q
Supernormal profit
A
In excess of normal profits
AR > AC
9
Q
Why profit is important to the economy (4)
A
• Reinvestment
• Market entry
• Allocative efficiency
• Signals the health of the economy
10
Q
Shutdown price
A
AR < AVC
This is because the amount it costs to produce is greater than the selling price
