Microeconomics (Lecture 7 & 8)

Cards (10)

define total revenue
the total amount of money a firm earns from the sales of G & S.
Formula for Total Revenue (TR)
= Price (P) x Quantity (Q)
define average revenue
the revenue a firm earns per unit of output sold
Formula for Average Revenue (AR)
= Total Revenue (TR) / Quantity (Q)
average revenue (AR) = price (P)
define marginal revenue (MR)
the additional revenue a firm earns from selling one more unit of output
Formula for Marginal Revenue (MR) 
= change in total revenue (TR) / change in quantity (Q)
Features of Perfect Competition Market
number of firms = many
freedom of entry = unrestricted
nature of products = homogenous (same)
examples = carrots, apples
firm is a price TAKER
Features of a Monopolistic Competition Market
number of firms = several
freedom of entry = unrestricted
nature of products = differentiated (similar)
examples = plumbers, restaurants
relatively elastic
Features of Oligopoly  
number of firms = few
freedom to entry = unrestricted
nature of product = differentiated or undifferentiated
examples = petrol cars, electrical appliances
relatively inelastic
Features of a Monopoly
number of firms = one
freedom of entry = restricted or completely blocked
nature of product = unique
examples = prescription drugs, local water company
price makers, inelastic demand