Make up your own demand function and then derive the corresponding mr function and find out the output level with corresponds to zero marginal revenue economics 11 standard
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There are four major market types namely, perfect competition, monopoly, monopolistic competition, and oligopoly. Before you understand these market forms, it is important to know the concepts of total revenue, average revenue, and marginal revenue. In this article, we will clarify these concepts with the help of some examples and look at the behavioral principles.
Total Revenue
A firm sells 100 units of a particular commodity for Rs. 10 each. If you were to calculate the amount realized by the firm, the answer is simple – Rs. 1,000 (100 x 10). This is the total revenue for the firm.
Hence, the total revenue refers to the amount of money realized by a firm on the sale of a commodity. Total revenue is expressed as follows:
TR = P x Q … where TR – Total Revenue, P – Price, and Q – Quantity of the commodity sold.
Average Revenue
Average revenue is simply the revenue earned per unit of the output. In simpler words, it is the price of one unit of the output. Average revenue is expressed as follows:
AR = TRQ … where AR – Average Revenue, TR – Total Revenue, and Q – Quantity of the commodity sold.
By using the formula for total revenue, we get
AR = P×QQ Or AR = P
For example, a firm sells 100 units of a commodity and realizes a total revenue of Rs. 1,000. Therefore, its average revenue is
AR = 1000100 = Rs. 10
Hence, the firm sells the commodity at a price of Rs. 10 per unit.
Marginal Revenue
Marginal revenue (MR) is the change in total revenue resulting from the sale of an additional unit of a commodity.
For example, consider a firm selling 100 units of a commodity and realizing a total revenue of Rs. 1,000. Further, it realizes a total revenue of Rs. 1,200 after selling 101 units of the same commodity. Therefore, the marginal revenue is Rs. 200.
Marginal revenue is also defined as the rate of change of total revenue resulting from the sale of an additional unit of a commodity.
Therefore,
MR = ΔTRΔQ … where MR – Marginal revenue, TR – Total revenue, Q – Quantity of the commodity sold, and Δ – the rate of change.
Further, for one unit change in output, we have
MRn = TRn – TRn-1
Where,
TRn – the total revenue when the sales are at the rate of ‘n’ units per period.
TRn-1 – the total revenue when the sales are at the rate of (n-1) units per period.
Total Revenue
A firm sells 100 units of a particular commodity for Rs. 10 each. If you were to calculate the amount realized by the firm, the answer is simple – Rs. 1,000 (100 x 10). This is the total revenue for the firm.
Hence, the total revenue refers to the amount of money realized by a firm on the sale of a commodity. Total revenue is expressed as follows:
TR = P x Q … where TR – Total Revenue, P – Price, and Q – Quantity of the commodity sold.
Average Revenue
Average revenue is simply the revenue earned per unit of the output. In simpler words, it is the price of one unit of the output. Average revenue is expressed as follows:
AR = TRQ … where AR – Average Revenue, TR – Total Revenue, and Q – Quantity of the commodity sold.
By using the formula for total revenue, we get
AR = P×QQ Or AR = P
For example, a firm sells 100 units of a commodity and realizes a total revenue of Rs. 1,000. Therefore, its average revenue is
AR = 1000100 = Rs. 10
Hence, the firm sells the commodity at a price of Rs. 10 per unit.
Marginal Revenue
Marginal revenue (MR) is the change in total revenue resulting from the sale of an additional unit of a commodity.
For example, consider a firm selling 100 units of a commodity and realizing a total revenue of Rs. 1,000. Further, it realizes a total revenue of Rs. 1,200 after selling 101 units of the same commodity. Therefore, the marginal revenue is Rs. 200.
Marginal revenue is also defined as the rate of change of total revenue resulting from the sale of an additional unit of a commodity.
Therefore,
MR = ΔTRΔQ … where MR – Marginal revenue, TR – Total revenue, Q – Quantity of the commodity sold, and Δ – the rate of change.
Further, for one unit change in output, we have
MRn = TRn – TRn-1
Where,
TRn – the total revenue when the sales are at the rate of ‘n’ units per period.
TRn-1 – the total revenue when the sales are at the rate of (n-1) units per period.
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