Question

What is theoretical relationship between i) Marginal Revenue and Average Revenue ii) Total
Revenue and Total Cost. ​

Answer 1

Answer:

i) Under perfect competition, the demand curve facing an individual firm is perfectly elastic and the price is beyond the control of a firm, average revenue remains constant. If the price or average revenue remains the same when extra units of a product are sold, the marginal revenue will be equal to average revenue.

ii ) The sum of fixed cost and the product of the variable cost per unit times quantity of units produced, also called total cost; C = F + V*Q. The revenue function minus the cost function; in symbols π = R - C = (P*Q) - (F + V*Q). The total cost divided by the quantity produced; AC = C/Q.