Revenue, Costs, and Profits

• Marginal Revenue (MR) and Total Revenue (TR) relationship

  When MR is positive, TR will increase as quantity increases

  When MR is negative, TR will decrease as quantity increases
• PED and Marginal Revenue (MR)


  When MR is positive, demand will be elastic

  When MR is negative, demand will be inelastic

  When MR = 0, demand will be unitary elastic
• Revenue Maximisation 


  A firm's total revenue is maximised when MR = 0
• Total Costs


  Total Variable Costs + Total Fixed Costs

  TVC + TFC
• Marginal cost 


  Cost of selling an additional unit

  MC= Change in TC / Change in Q
• Diminishing marginal returns


  In the short run, as more factors are employed, the marginal returns from these factors will eventually decrease
• Types of internal economies of scale (Richard's Mum Flies Past The Moon)


  Risk-bearing economies

  Managerial economies

  Financial economies

  Purchasing economies

  Technical economies

  Marketing economies
• Types of internal diseconomies of scale (ABC)

  Alienation

  Bureaucracy

  Communication
• Average Variable Cost formula


  AVC= TVC/Q