1. Marginal, Average & Total Revenue
Imperfect Competition

2. 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

3. Firms revenues
Output
Price per unit
(£)
Total revenue
Average revenue (£)
Marginal revenue (£) -
500 1
400 2
450
900
330 3
410
1230
270 4
375
1500
250 5
350
1750

4. Firm revenues The conditions of demand give the following:-
Average revenue (AR) and marginal (MR) revenue are not equal.
The average revenue and marginal revenue curves are downward sloping .
Average revenue is always greater than marginal revenue.
As price per unit and average revenue are the same, the AR curve is also the demand (D) curve for the firm.
Output
Price per unit
(£)
Total revenue
Marginal revenue (£)
Average revenue (£) -
500 1
400 2
450
900
330 3
410
1230
270 4
375
1500
250 5
350
1750

5. Go to excel document

6. Revenue points
Point A is the point of revenue maximisation. (where the MR line cuts the X axis)
Points to the left of A give an elastic PED. (reducing prices when on the left of point A results in an increase in total revenue)
Points to the right of A give an inelastic PED. (reducing prices when on the right of point A results in a decrease in total revenue)
Output
Price per Unit
Total Revenue
Marginal Revenue
Average Revenue 8
650
5200
200 9
600
5400
100 10
550
5500 11
500
-100 12
450
-200 13
400

7. Revenue points
Point A is the point of revenue maximisation. (where the MR line cuts the X axis)
Points to the left of A give an elastic PED. ( reducing prices when on the left of point A results in an increase in total revenue)
Points to the right of A give an inelastic PED. (reducing prices when on the right of point A results in a decrease in total revenue)