"Average revenue", for a specific level of sales, is the total revenue divided by the number of units sold, or in other words, revenue per unit, or, simply, "price". This average is over the entire sales in a given time period, market, etc. "Marginal revenue" is "average revenue" evaluated at every possible level of sales. You see, the more you sell, the lower the price will be, according to the law of demand. If you sell 1,000 widgets, you may get $1 apiece for them, but if you sell 10,000 of them, you may have to lower the price to 90 cents to sell them all. Of course, if the market is perfectly competitive (you have lots of competitors selling widgets), then you alone can't affect the price very much with your change in output, and the Marginal Revenue is, essentially, constant, at least over the relevant range of level of sales. However, even in perfect competition, you could, theoretically, increase your sales so much that you dominate all of your competitors, and then you would have to lower your price to sell all of your widgets. The thing is, under perfect competition, everyone is operating exactly at the level of sales where marginal cost is equal to marginal revenue, so if your marginal revenue goes down, your marginal profit becomes negative. So you won't do that. In fact, this concept of marginal revenue (when compared to marginal cost) is exactly the mechanism that ensures you don't try to dominate a perfectly competitive market. (If the market is a monopoly, or oligopoly, however, all bets are off. For that matter, even if a market is otherwise perfectly competitive (large number of firms) but entry and exit are not free (say, large start-up costs), a firm with deep enough pockets can put everyone else out of business by over-producing for a while and driving the price down to where all firms are losing money, then raise the price back up, to even above the previous price, once it becomes a monopoly.)
In economics, marginal profit is the difference between the marginal revenue and the marginal cost of producing an additional unit of output.
what is average revenue?
moarginal product of labor
price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co
Total average pertains to annual revenue. While marginal revenue is equivalent to quarterly profits. The relationship between the two is only that one is the dividend of the other.
In economics, marginal profit is the difference between the marginal revenue and the marginal cost of producing an additional unit of output.
what is average revenue?
moarginal product of labor
price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co
Total average pertains to annual revenue. While marginal revenue is equivalent to quarterly profits. The relationship between the two is only that one is the dividend of the other.
Explain why the marginal revenue(MR) is always less than the average revenue (AR)?
I'm thinking that marginal revenue product is the marginal revenue on one product, and marginal revenue is the marginal revenue on the whole firm sales... I'm wondering the same thing but the above response is incorrect. both terms imply values on one item as indicated by the "marginal"
marginal revenue always lies behind the demand curve,and when demand increases marginal revenue also increases.demand curve is used to determine price of a commodity.
This question reflects a fundamental misunderstanding of supply and demand. Marginal revenue and average revenue are related to a firm's cost function, and are thus connected to SUPPLY. They have nothing to do with a demand curve in classical economics, which is the marginal benefit to the CONSUMER of being in the market.
when marginal revenue equal to marginal cost,when marginal cost curve cut marginal revenue curve from the below and when price is greter than average total cost
Average Revenue: Total revenue divided by the number of units sold. Marginal Revenue: Is the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price. It can also be described as the change in total revenue ÷ the change in the number of units sold. Relationship: They both are the revenue brought in by, in this case, units sold. They are both used to calculate the total revenue just that marginal is any exrta revenue that the average revenue has left over.
Marginal revenue is the change in total revenue over the change in output or productivity.