Distinguish between average revenue and marginal revenue...
Answers
That revenue which is defined as the per unit of output sold is called as the average revenue. It will play very important role in the determination of the firm profit. Average revenue subtracted from average cost is called as the is called as the per unit profit.
When we increase the sales of the product by single unit the revenue will be called as the Marginal revenue which is the additional revenue. For this the unit prices of the products will be decreased to increase the sales of the products.
Average Revenue(AR) is defined as the revenue per unit of the commodity.
It is calculated by dividing Total Revenue by the number of old to the customers.
Marginal Revenue(MR) is the addition to total revenue earned by selling n units of product instead of (n-1) units.
Under Perfect Competition, AR= MR.