10-мавзу. Ишлаб чиқариш назарияси

Total revenue (TR) is the revenue that the firm receives from the sale of its products. Total revenue for a perfectly competitive firm equals the market price of the good (P) times the quantity (q) of units sold (TR = P x q).


Average revenue (AR) equals total revenue divided by the number of units sold of the product (TR/q, or P x q/q). So, in perfect competition, average revenue is equal to price of the good.


Marginal revenue (MR) is the additional revenue derived from the sale of one more unit of the good. In a perfectly competitive market, because additional units of output can be sold without reducing the market price of the product, marginal revenue is constant and equal to the market price, which is also the average revenue.
In perfect competition, then, marginal revenue, average revenue, and price are all equal: P = MR = AR.


Exhibit 1: Revenues for a Perfectly Competitive Firm

Firms will maximize profits at that output where they maximize the difference between total revenue and total costs--the output level where marginal revenue equals marginal cost.

As long as the marginal revenue derived from expanded output exceeds the marginal cost of that output, the expansion of output creates additional profits. However, expansion of output when the marginal cost of production exceeds marginal revenue will lead to losses on the additional output, decreasing profits.

The profit-maximizing level of output is where a firm’s MR = MC.

Exhibit 2: Finding the Profit-Maximizing Level of Output

Be careful not to make the mistake of focusing on profit per unit rather than total profit.

As long as producing and selling units adds more to revenues than to costs, they add to profits. However, beyond that, those units reduce profits.

Exhibit 3: Cost and Revenue Calculations for a Perfectly Competitive Firm