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10 Cards in this Set
- Front
- Back
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How can a firm stay open in the short run? What will the supply curve be equivalent to? (Think about the diagram) |
Int short run, a firm will stay open providing it can cover its average variable costs. The short run supply curve is therefore the MC Curve above the average variable cost |
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What are the three types of revenue? |
Total Revenue, Average Revenue and Marginal Revenue |
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Define Total Revenue and provide the formula |
Total amount of money received during a given period of time. Sometimes called a turnover. Formula TR= Price x Quantity |
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Define Average Revenue and provide the formula |
The amount of money a firm receives per unit sold. AR= TR/Quantity (also known as Price) |
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What is the relationship between price and average revenue? |
AR=P The price consumers are willing to pay is shown on their demand curve. Therefore we can say AR=D. |
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Define Marginal Revenue and provide the formula |
The amount received from an additional unit of output. MR= change in TR/change in Quantity |
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If demand for a product is perfectly elastic, what does the Total Revenue, Average Revenue and Marginal revenue curves look like? |
Back (Definition) |
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If elasticity varies along the Demand/Average Revenue curve, what does the Total Revenue, Average Revenue and Marginal Revenue curves look like? |
Back (Definition)
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When is Total Revenue at its highest? |
When MR=0. As this is because the firm receives no additional revenue from selling an extra unit of product. |
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What is the relationship between the Average Revenue and Marginal Revenue curves? |
Marginal Revenue Curve is twice as steep as the average revenue curve. E.g for £3 average revenue drops, marginal revenue will drop by £6. |
