Definition And Calculation Of Revenue: Total, Average And Marginal Revenue (Tr, Ar, Mr)
Economics notes
Definition And Calculation Of Revenue: Total, Average And Marginal Revenue (Tr, Ar, Mr)
➡️ Internal diseconomies of scale occur when a firm's production costs increase as it grows larger. This can be due to a lack of specialization, increased bureaucracy, and a decrease in efficiency.
➡️ External diseconomies of scale occur when the costs of production increase due to external factors, such as increased competition, higher taxes, and increased regulation.
➡️ Both internal and external diseconomies of scale can lead to decreased profits and decreased competitiveness in the market, making it important for firms to be aware of these factors and take steps to mitigate their effects.
What is total revenue and how is it calculated?
Total revenue (TR) is the total amount of money a firm earns from selling its products or services. It is calculated by multiplying the price of the product by the quantity sold. For example, if a firm sells 100 units of a product at $10 each, its total revenue would be $1,000.
What is average revenue and how is it calculated?
Average revenue (AR) is the revenue per unit of output sold. It is calculated by dividing total revenue by the quantity sold. For example, if a firm sells 100 units of a product at $10 each, its total revenue would be $1,000 and its average revenue would be $10.
What is marginal revenue and how is it calculated?
Marginal revenue (MR) is the additional revenue earned from selling one more unit of output. It is calculated by subtracting the total revenue of the previous level of output from the total revenue of the current level of output. For example, if a firm sells 100 units of a product at $10 each and then sells 101 units at $9.50 each, its marginal revenue for the 101st unit would be $950 - $1,000 = -$50. This means that the firm would lose $50 by selling the 101st unit at a lower price.