Question

Distinguish between 'average revenue and average cost'.

Answer 1

Average Revenue -

Average revenue refers to revenue received per unit from the sale of given quantity of goods. It is obtained by dividing total revenue by the number of units sold.

For example, if a producer sells 10 units of goods and receives total revenue of Rs 500 then average revenue will be = 500/10 = Rs 50.

Average Cost –

Average Cost refers to the cost incurred per unit of production and distribution. It is obtained by dividing total cost by the number of units produced.

For Example: If a producer produces 10 units of goods and incurred total cost of Rs. 500 then average cost will be $=500/10=Rs50$