3.4.5 Average revenue, total revenue, and profit

• What is Total Revenue (TR) defined as?

  Total income from sales
• Understanding Total Revenue is crucial for a firm's profitability and pricing decisions.


  True
• The formula for Average Revenue is AR = Total Revenue / Quantity
• What is the relationship between Total Revenue and Average Revenue?

  AR equals price
• What is Profit defined as?

  Income after deducting costs
• Economic Profit is earned when total revenue exceeds total costs
• What is the formula for calculating profit?

  Profit = Total Revenue - Total Costs
• Normal profit ensures a firm generates excess income.

  False
• Match the profit type with its definition:

  Normal Profit ↔️ TR = TC

  Economic Profit ↔️ TR > TC

  Supernormal Profit ↔️ Significantly high TR - TC
• What is the formula for calculating total revenue?

  TR = Price × Quantity
• How is average revenue calculated?

  AR = TR / Q
• Match the revenue concept with its formula:

  Total Revenue ↔️ P × Q

  Average Revenue ↔️ TR / Q
• Average revenue is always equal to the price of the product.


  True
• What is the formula for calculating profit?

  Profit = Total Revenue - Total Costs
• What type of profit indicates a firm is outperforming its best alternative use of resources?

  Economic profit
• Match the profit type with its characteristic:

  Normal Profit ↔️ Covers all expenses

  Economic Profit ↔️ Attracts new investment

  Supernormal Profit ↔️ Temporary advantage
• Supernormal profit may indicate a significant advantage over competitors.

  True
• A supernormal loss indicates the firm is at a significant disadvantage
• What are the three main types of losses a firm can experience?

  Normal, Supernormal, Economic
• A normal loss ensures a firm remains in operation without earning additional income.


  True
• An economic loss occurs when a firm's total revenue is less than its total costs
• Match the loss type with its definition:

  Normal Loss ↔️ TR = TC

  Supernormal Loss ↔️ High TC - TR

  Economic Loss ↔️ TR < TC
• What is the primary goal of firms in terms of profit maximization?

  Maximize their profit
• Supernormal profit is sustainable in the long run due to monopoly power or favorable market conditions.

  False
• The formula for total revenue (TR) is price multiplied by quantity
• Profit is calculated as the difference between total revenue and total costs.


  True
• Match the profit type with its calculation:

  Normal Profit ↔️ TR = TC

  Economic Profit ↔️ TR > TC

  Supernormal Profit ↔️ High TR - TC
• What does the variable 'P' stand for in the context of revenue calculations?

  Price
• The formula for Total Revenue (TR) is TR = P × Q.


  True
• Average Revenue equals the price
• What is the relationship between Total Revenue (TR) and Average Revenue (AR)?

  AR equals the price
• Normal profit occurs when TR equals TC.


  True
• Supernormal Profit is unsustainable in the long term because it relies on temporary market advantages
• Economic loss occurs when TR is less than TC, including opportunity costs.


  True
• Firms maximize profit when Marginal Revenue equals Marginal Cost.


  True
• When Total Revenue exceeds Total Costs, including opportunity costs, the firm earns an economic profit.
• Average Revenue is calculated as Total Revenue divided by Quantity.
• The formula for Total Revenue is Price multiplied by Quantity.
• The formula for Total Revenue is TR = Price (P) × Quantity
• What is Average Revenue (AR) defined as?

  Revenue per unit sold