Revenue (new) Flashcards
What are revenues?
The costs a firm receives when they sell goods and services they produce over a given period of time
What are the 3 fundamental revenue concepts?
Total revenue
Average revenue
Marginal revenue
What is TR?
The total amount of money firms receive by selling a good or service
How is TR calculated?
Price * Quantity
What is AR?
Revenue per unit of output sold
How to calculate AR?
It is equal to the price of a product.
Total Revenue / Quantity
What is MR?
The additional revenue coming from the sale of an additional unit of output sold
How to calculate MR?
A change in Total Revnue / A change in Quantity
Are firms price takers or makers in perfect competition?
Price takers
In perfect competition what does Demand equal to?
It is the same as Average revenue, Marginal revenue and Price
When PED is elastic what should the firm do?
Lower its price
When PED is inelastic what should the firm do?
Increase its price
When PED is unitary what should the firm do?
Leave the price unchanged
