1.6.1 revenue and costs

What is total revenue (TR)?

TR = Price × Quantity sold; revenue received from selling a given level of output

What is average revenue (AR)?

AR = TR ÷ Quantity sold; average receipt per unit (price per unit)

What is marginal revenue (MR)?

Extra revenue earned from selling one additional unit; difference between TR at different levels of output

What are fixed costs (FC)?

Costs that do not vary with output, e.g., rent, advertising, capital goods; indirect costs

What are variable costs (VC)?

Costs that change with output, e.g., raw materials; direct costs

What is total cost (TC)?

TC = FC + VC; cost to produce a given level of output

What is average cost (AC)?

AC = TC ÷ Quantity produced; cost per unit

What is marginal cost (MC)?

Cost of producing one extra unit

How do you calculate percentage change?

((Final value – Starting value) ÷ Starting value) × 100

What does a negative percentage change indicate?

A decrease in value

What does a positive percentage change indicate?

An increase in value