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Questions and Answers
What is the unit of output represented by the letter "Q" in the table?
What is the unit of output represented by the letter "Q" in the table?
Quantity of Products
What is the formula for calculating total revenue when TR = P x Q?
What is the formula for calculating total revenue when TR = P x Q?
Total Revenue = Price per product x Quantity of Products
What does the formula MR = ΔTR/ ΔQ represent?
What does the formula MR = ΔTR/ ΔQ represent?
Marginal Revenue
What is the formula for Average Revenue?
What is the formula for Average Revenue?
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When does the firm in a perfectly competitive market have constant marginal revenue?
When does the firm in a perfectly competitive market have constant marginal revenue?
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What is the formula used to calculate total revenue?
What is the formula used to calculate total revenue?
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The demand curve in a perfectly competitive market is perfectly elastic.
The demand curve in a perfectly competitive market is perfectly elastic.
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What is the relationship between AR, MR, and P in the perfectly competitive market?
What is the relationship between AR, MR, and P in the perfectly competitive market?
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What type of market is displayed in the table where TR = P x Q?
What type of market is displayed in the table where TR = P x Q?
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What is the difference between explicit costs and implicit costs?
What is the difference between explicit costs and implicit costs?
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What is the name of the costs that are directly incurred, such as payments for wages, materials, or rent?
What is the name of the costs that are directly incurred, such as payments for wages, materials, or rent?
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What is the formal term for the opportunity cost of using resources in a particular way?
What is the formal term for the opportunity cost of using resources in a particular way?
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What is the sum of explicit costs and implicit costs?
What is the sum of explicit costs and implicit costs?
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Study Notes
Perfect Competition
- Firms are price takers
- Large number of buyers and sellers
- Homogenous products (identical)
- No barriers to entry or exit
- Perfect knowledge
- Constant profit in the long run
Revenue Curves
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Total Revenue (TR): Price multiplied by Quantity (TR = P x Q)
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Average Revenue (AR): Total revenue divided by quantity (AR = TR/Q)
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Marginal Revenue (MR): Revenue arising from the sale of an additional product unit, (MR = ΔTR/ΔQ).
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In perfect competition, AR = MR = P (price)
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