What is the difference between average revenue and marginal revenue?
Understand the Problem
The question is asking for the distinction between average revenue and marginal revenue, which are two concepts in economics. Average revenue refers to the total revenue divided by the quantity sold, while marginal revenue is the additional revenue generated from selling one more unit of a good or service. The user seeks to understand the key differences and implications of these terms in economic analysis.
Answer
Marginal revenue is the additional revenue from selling an extra unit, while average revenue is the revenue per unit sold.
The final answer is: Marginal revenue is the additional revenue gained from selling one more unit of a product, while average revenue is the total revenue averaged over all units sold.
Answer for screen readers
The final answer is: Marginal revenue is the additional revenue gained from selling one more unit of a product, while average revenue is the total revenue averaged over all units sold.
More Information
Marginal revenue helps businesses understand the impact of selling additional units, aiding in pricing and production decisions. Average revenue gives a broader picture of overall performance across all units sold.
Tips
A common mistake is confusing average revenue with total revenue. Average revenue is calculated by dividing total revenue by the number of units sold, not just looking at total revenue.
Sources
- Marginal Revenue Explained, With Formula and Example - investopedia.com
- Difference between Average Revenue and Marginal Revenue - byjus.com
- What Is Marginal Revenue? - Baremetrics - baremetrics.com
