1.

State the meaning of average revenue and marginal revenue.

Answer»

Marginal revenue of a firm is defined as the increase in total revenue for a unit increase in the firm’s output. It is obtained by dividing the change in total revenue (∆TR) by change in quantity (∆q). Thus,

MR = ∆TR/∆q.

Average revenue:

We calculate average revenue, by dividing total revenue by the quantity sold. The following formula used:

AR = TR/q.



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