Marginal, Average & Total Revenue Perfect Competition

Recap on the conditions that exist in a perfectly competitive market. A large numbers of buyers and sellers. Buyers or sellers cannot influence the ruling market price by their own actions. All buyers and seller can trade as much as they want at the ruling market price. All buyers and sellers possess perfect market information. Their exists freedom of entry and exit to and from the market. Individuals firm’s products are homogenous (uniform).

The firm’s revenues Price per unit:- the price at which a firm offers a good or service for sale to each customer. (This is more commonly referred to as the average revenue. See definition and formula below) Total revenue:- the overall sum of money received by a firm for the sale of its products. Marginal revenue:- The addition to total revenue from the sale of one extra unit. Average revenue:- The price per unit AR = TR quantity sold

The firm’s revenues in a perfectly competitive market Output Price per unit (£) Total revenue Marginal revenue (£) Average revenue (£) - 500 1 2 1000 3 1500 4 2000 5 2500

The firm’s revenues in a perfectly competitive market Output Price per unit (£) Total revenue Average revenue (£) Marginal revenue (£) - 500 1 2 1000 3 1500 4 2000 5 2500