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Class revenue analysis7. Deriving a firm’s AR and MR: price-taking firm O O Price (£) AR, MR (£) P e S D D = AR = MR Q (millions) Q (hundreds) (a) The market (b) The firm 8. Total revenue for a price-taking firm TR TR (£) Quantity Quantity (units) 0 200 400 600 800 1000 1200 Price = AR = MR (£) 5 5 5 5 5 5 5 TR (£) 0 1000 2000 3000 4000 5000 6000 10. AR and MR curves for a firm facing a downward-sloping demand curve Q (units) 1 2 3 4 5 6 7 P =AR (£) 8 7 6 5 4 3 2 TR (£) 8 14 18 20 20 18 14 MR (£) 6 4 2 0 -2 -4 MR AR, MR (£) Quantity AR 12. TR curve for a firm facing a downward-sloping D curve TR Quantity TR (£) Quantity (units) 1 2 3 4 5 6 7 P = AR (£) 8 7 6 5 4 3 2 TR (£) 8 14 18 20 20 18 14 14. AR and MR curves for a firm facing a downward-sloping demand curve AR, MR (£) Quantity MR AR Elasticity = -1 Elastic Inelastic 15. TR curve for a firm facing a downward-sloping D curve TR Elastic Inelastic Quantity TR (£) Elasticity = -1 24. Measuring the maximum profit using average curves T O T A L P R O F I T MR Quantity Costs and revenue (£) MC AC AR Total profit = £1.50 x 3 = £4.50 6.00 4.50 b a Editor's Notes 13 14 14 14 15 15 15 15 16 16 16