Revenue, Profit and change

Question 1

Marginal revenue

Answer 1

The addition to total revenue resulting from the sale of one more unit. Change in TR / Change in output

Question 2

Perfect competition

Answer 2

The firms are price takers. Each individually is too small to affect market price (no market power) so equilibrium price is found through normal supply and demand.

Question 3

Perfect competition assumptions

Answer 3

-Firms seek to maximise profits
-Firms compete on price alone

Question 4

Why cant firms change their price in perfect competition

Answer 4

Increasing their price would see their sales go to 0 and decreasing their price makes no sense as their profits would be lowered for no reason as they was already selling out.

Question 5

D

Answer 5

D=AR=MR (For perfect competition) as everything is the same price so AR will equal MR.

Question 6

Elasticity in perfect competition and monopoly

Answer 6

Perfect competition-perfectly elastic as the tiniest change in price will see demand drop to 0
Monopoly- Elasticity falls as price falls e.g. high price=elastic, low price=inelastic. Unit elastic halfway down the demand curve

Question 7

Profit

Answer 7

Difference between total sales revenue and COP. Normal profit is the minimum level a firm needs to survive. Supernormal profit is anything above the normal profit. This attracts new firms to the market.

Question 8

Technological change

Answer 8

Describes the overall effect of innovation, invention and spread of technology in an economy.

Question 9

Invention

Answer 9

Making an entirely new product or process

Question 10

Innovation

Answer 10

Turning an invention into a marketable product. Also the subsequent development / refinement of the product