3
Question
How are
the total revenue of a firm, market price, and the quantity sold by
that firm related to each other?
How are the total revenue of a firm, market price, and the quantity sold by that firm related to each other?
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Solution
Total
revenue is defined as the total sales proceeds of a producer by
selling corresponding level of output. In other words, it is defined
as price times the quantity of output sold.
Total
Revenue = Price × Quantity of output sold
TR
= P × Q
TR
= PQ
In a
perfectly competitive market, the market price is given, i.e., a firm
acts as a price taker and cannot influence the price. Hence, a
particular firm can influence its TR by altering the quantity of
output sold.
Total revenue is defined as the total sales proceeds of a producer by selling corresponding level of output. In other words, it is defined as price times the quantity of output sold.
Total Revenue = Price × Quantity of output sold
TR = P × Q
TR = PQ
In a perfectly competitive market, the market price is given, i.e., a firm acts as a price taker and cannot influence the price. Hence, a particular firm can influence its TR by altering the quantity of output sold.
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