CA Foundation · Business Economics · Price Determination in Different Markets
A firm sells 10 units at ₹50 each. Total revenue is ₹500. Which of the following correctly defines average revenue (AR)?
Average revenue is total revenue divided by the quantity sold, AR = TR/Q. For the firm, 500 divided by 10 gives ₹50, which equals the price per unit. Marginal revenue is the change in revenue from one extra unit, which is a different concept.
- ATotal revenue divided by the quantity soldCorrect
- BChange in total revenue from selling one more unit
- CTotal revenue minus total cost
- DTotal cost divided by the quantity sold
Explanation
Average revenue is total revenue per unit sold, AR = TR/Q. Here AR = 500/10 = ₹50, which equals the price. Option B describes marginal revenue, and option C describes profit.
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