Question 1. How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
Answer: Total Revenue = Market Price x Quantity sold
Question 2. Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of good is Rs. 10
Answer:
Question 3. What would be the shape of the demand curve so that the total revenue curve is
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
Answer:
(b) When TR is a horizontal line, demand curve is a rectangular hyperbola. It is shown:
The reason is that,the price at each level of output declines
Question 4. Comment on the shape of the MR curve in case the TR curve is a (i) positively sloped straight line, (ii) horizontal straight line. [3-4 Marks]
Answer: (i) When TR curve is positively sloped straight line, MR is a horizontal line. MR coincides with the demand curve. Price or AR is constant at each level of output.
When AR is constant, MR is also constant.
(ii) When TR is a horizontal straight line, MR is zero. It is because horizontal TR means when price falls, quantity demanded rises in the same proportion. Thus, MR is zero. MR curve coincides with the x-axis
Question 5. From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Answer:
I. Very Short Answer Type Questions
Question 1. Give the meaning of revenue. Or
Define revenue.
Answer: Revenue of a firm refers to receipts from the sale of output in a given period.
Question 2. Define total revenue.
Answer: The amount received from the sale of given amount of output is known as Total Revenue.
For example, if a firm sells 100 chairs at a price of ? 200 per chair, The total revenue will be 100 Chairs x Rs. 200 = Rs 20,000.
Question 3. Define average revenue.
Answer: The per unit amount received from the sale of given amount of output.
Question 4. Define marginal revenue.
Answer: The amount received from the sale of additional unit of output is known as Marginal Revenue.
Question 5. How is MR derived from TR?
Answer: MRn=TRn−TRn−1
Question 6. What change in TR will result in a decrease in MR?
Answer: When TR increases at a diminishing rate.
Question 7. When TR falls, what happens to MR?
Answer: MR is negative.
Question 8. How does TR change with the output when MR is zero?
Answer: Then, TR is maximum and constant.
Question 9. What is the behaviour of average revenue in a market in which a firm can sell more only by lowering the price?
Answer: Average revenue will fall.
Question 10. What is the behaviour of Marginal Revenue in a market in which a firm can sell any quantity of the output it produces at a given price? [AI 2012]
Answer: Marginal revenue remains constant.
II. Short Answer Type Questions
Question 1. Calculate Average Revenue (AR) and Marginal Revenue (MR).
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Question 2. Calculate TR and AR from the following data.
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Question 3. Calculate TR and MR from the following data.
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Question 4. Complete the following table.
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Question 5. Complete the following table.
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Question 6. Complete the following table.
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Question 7. Complete the following table.
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Question 8. Complete the following table.
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Question 9. Complete the following table.
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Question 10. Calculate TR, MR and AR.
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Question 11. Calculate TR, AR and MR.
Answer:
