3.3 rev, cost and profit

• What is revenue?

  Revenue is the money earned from the sale of goods and services.
• What is total revenue (TR)?

  Total revenue is the total amount of money coming into the business through sales.

  
• How is total revenue calculated?

  Total revenue is calculated as quantity multiplied by price.
• What is average revenue (AR)?

  Average revenue is total revenue divided by output.

  
• What does marginal revenue (MR) represent?

  Marginal revenue is the extra revenue earned from selling one more unit of production.
• How can marginal revenue be calculated?

  Marginal revenue can be calculated as the change in total revenue divided by the change in output.
• What is a perfectly elastic demand curve?

  A perfectly elastic demand curve means firms have no price-setting power and the price is constant.
• What does it mean when MR=AR=D?

  It means that marginal revenue, average revenue, and demand are equal in perfectly competitive markets.
• What is the shape of the total revenue (TR) curve in perfect competition?

  The TR curve is upward sloping because prices are constant.
• How does the demand curve behave for most goods?

  The demand curve for most goods is downward sloping, indicating that price decreases as output increases.
• What is the relationship between the demand curve and average revenue (AR) curve?

  The demand curve for a firm is the same as the firm's average revenue curve.

  
• What happens to marginal revenue when it is positive?

  When marginal revenue is positive, total revenue grows as the firm sells the product at a lower price.
• What does it indicate if marginal revenue is negative?

  If marginal revenue is negative, total revenue decreases as price decreases or output increases.
• What does it mean when MR=0?

  When MR=0, total revenue is maximized and the demand curve is unitary elastic.
• What is the economic cost of production?

  The economic cost of production is the opportunity cost of production.
• Why is the TR curve U-shaped?

  The TR curve is U-shaped because total revenue rises with output initially but then begins to decline.
• What are fixed costs in the short run?

  Fixed costs are costs that do not change with output and remain constant.
• What are variable costs in the long run?

  In the long run, all costs are variable.
• What is total cost (TC)?

  Total cost is the cost of producing a given level of output, which is fixed plus variable costs.
• What is total fixed cost (TFC)?

  Total fixed cost is costs that do not change with output and remain constant.
• What is total variable cost (TVC)?

  Total variable cost is costs that change directly with output.
• How is average total cost (ATC) calculated?

  Average total cost is calculated as total costs divided by output.
• How is average fixed cost (AFC) calculated?

  Average fixed cost is calculated as total fixed cost divided by output.
• How is average variable cost (AVC) calculated?

  Average variable cost is calculated as total variable cost divided by output.
• How can marginal cost be calculated?

  Marginal cost can be calculated as the change in total cost divided by the change in output.
• What does marginal cost (MC) represent?

  Marginal cost is the extra cost of producing one extra unit of a good.
• What is the short run in production?

  The short run is the length of time when at least one factor of production is fixed.
• What is diminishing marginal productivity?

  Diminishing marginal productivity occurs when adding more of a variable factor results in less additional output.
• What happens to marginal output as more inputs are added in the short run?

  Marginal output will decrease as more inputs are added in the short run.
• What is the average fixed cost curve (AFC) shape?

  The average fixed cost curve starts high and falls as output increases.
• Why is the average total cost curve (ATC) U-shaped?

  The average total cost curve is U-shaped due to the law of diminishing marginal productivity.

  
• How does the average variable cost curve (AVC) behave as output increases?

  The average variable cost curve gets closer to the average total cost curve as output increases.
• What is the relationship between marginal cost (MC) and average cost (AC)?

  The marginal cost line cuts the average cost line at the lowest point on the average cost curve.
• What happens if marginal cost is below average cost?

  If marginal cost is below average cost, average cost will continue to fall.
• What happens if marginal cost is above average cost?

  If marginal cost is above average cost, average cost will rise.
• What does the total cost curve look like when average costs are constant?

  The total cost curve would be a straight diagonal line beginning at the origin.
• How can average costs be determined from the total cost curve?

  Average costs can be determined from the total cost curve by analyzing the slope at different points.
• What is the relationship between short-run average cost (SRAC) curves and long-run average cost (LRAC) curves?

  SRAC curves are U-shaped due to diminishing returns, while LRAC curves are U-shaped due to economies and diseconomies of scale.

  
• What does the LRAC curve represent?

  The LRAC curve represents the minimum level of average costs attainable at any given level of output.

  
• What causes movement along the LRAC curve?

  Movement along the LRAC curve is due to a change in output affecting the average cost of production.