Revenue and profit

Question 1

Total revenue

Answer 1

Total amount of money received in a time period from a firm’s sale, also called turnover

Question 2

TR formula

Answer 2

Total quantity sold x Price (Q x P)

Question 3

Average revenue

Answer 3

Revenue per unit sold

Question 4

AR formula

Answer 4

Total revenue/Quantity sold so AR=P

Question 5

Demand curve (D)

Answer 5

Shows us what quantity of a product a firm will be able to sell at a particular price, determines how revenue relates to output

Question 6

Demand curve notes

Answer 6

-P=AR so same curve shows relationship between Q and AR
-Therefore D curve can also be labelled AR
-The AR is a firm’s D curve because the TR/Q and the P and Q are both taken from the demand curve

Question 7

Economic profit formula

Answer 7

Total revenue - Total costs

Question 8

Kinds of profit in economics

Answer 8

Normal and supernormal

Question 9

Normal profit

Answer 9

The minimum level of profit needed to keep firm in the industry in the long run
TR=TC
In other words, normal profit is an economic profit of 0

Question 10

Supernormal profit

Answer 10

When the profit is above the normal level, also known as abnormal profit
TR>TC
Revenue generated from FoP in this way is greater than could’ve been generated by them using any other way