Cost, Revenue and Profit

• Total Revenue = Price x Quantity Sold
• Average Revenue = Total Revenue / Quantity Sold = Price
• Marginal Revenue = Additional Revenue / Additional Quantity Sold
• A firm is a price setter when it is able to influence the price of the good by altering its own output.
• A firm is a price taker when it is unable to influence the market price of the good by altering its own output.
• Identify the types of firms:

  A) Price Taker

  B) Price Setter

  
• Identify the different types of profits:

  A) Normal Profits

  B) Subnormal Profits

  C) Supernormal Profits

  
• In the short-run, firms shut down only if they are unable to earn sufficient revenue to cover their variable cost.

  TR < TVC or AR < AVC
• In the long-run, firms shut down when they make subnormal profits.