Theory Of Revenue Flashcards
What is revenue in economics?
Revenue is the income generated from the sale of goods or services.
Define total revenue.
Total revenue is the total income received from selling a certain quantity of goods or services.
How is total revenue calculated?
Total revenue is calculated by multiplying the price per unit by the quantity sold.
What is marginal revenue?
Marginal revenue is the additional revenue gained from selling one more unit of a good or service.
True or False: Marginal revenue can be negative.
True.
What happens to total revenue when marginal revenue is positive?
Total revenue increases when marginal revenue is positive.
What is average revenue?
Average revenue is the revenue earned per unit of output sold.
How is average revenue calculated?
Average revenue is calculated by dividing total revenue by the quantity sold.
True or False: Average revenue is equal to price in a perfectly competitive market.
True.
What is the relationship between price and marginal revenue in a monopolistic market?
In a monopolistic market, marginal revenue is less than price.
What is the formula for calculating total revenue?
Total Revenue = Price × Quantity.
What does it mean if total revenue is inelastic?
If total revenue is inelastic, a decrease in price leads to a decrease in total revenue.
Fill in the blank: When demand is elastic, lowering the price will ______ total revenue.
increase.
What is the shape of the total revenue curve in a monopolistic market?
The total revenue curve is typically upward sloping initially and then peaks before declining.
True or False: In perfect competition, firms can influence market price.
False.
What is the effect of price discrimination on revenue?
Price discrimination can increase total revenue by charging different prices to different consumers.
What is the significance of the elasticity of demand in revenue theory?
The elasticity of demand helps determine how changes in price affect total revenue.
What is the relationship between price elasticity and total revenue?
If demand is elastic, total revenue moves in the opposite direction of price; if inelastic, total revenue moves in the same direction as price.
Define price elasticity of demand.
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.
What is a perfectly inelastic demand?
Perfectly inelastic demand means quantity demanded does not change regardless of price changes.
What does it mean if demand is unitary elastic?
If demand is unitary elastic, a change in price does not affect total revenue.
Fill in the blank: The total revenue will be maximized when marginal revenue equals ______.
zero.
What type of market structure is associated with a downward sloping demand curve?
Monopoly or monopolistic competition.
What is the significance of understanding revenue theory for businesses?
Understanding revenue theory helps businesses make informed pricing and production decisions.
True or False: All firms aim to maximize total revenue.
False; firms may also aim to maximize profit.
