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Question
Distinguish between total revenue, average revenue and marginal revenue.
Distinguish Between
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Solution
| Sr. No. | Basis | Total Revenue (TR) | Average Revenue (AV) | Marginal Revenue (MR) |
| 1. | Meaning | Total income earned by a firm from selling all units of output. | Revenue earned per unit of output sold. | Additional revenue earned by selling one more unit of output. |
| 2. | Formula | TR = Price × Quantity (TR = P × Q) | AR = TR ÷ Quantity | MR = Change in TR ÷ Change in Quantity or MR = TRn − TRn−1 |
| 3. | Nature | It increases with output but may become constant or fall after a point. | Usually equal to price under perfect competition. | Can decrease, increase, or become negative depending on market conditions. |
| 4. | Graph shape | Upward sloping (may flatten or fall) | Usually a horizontal straight line under perfect competition. | Downward sloping in imperfect competition; horizontal in perfect competition. |
| 5. | Example | Selling 5 units at ₹ 10 each gives TR = ₹ 50 | AR = ₹ 10 (TR = ₹ 50, Quantity = 5, so AR = 50 ÷ 5) | If TR increases from ₹ 40 to ₹ 50 by selling 1 more unit, then MR = ₹ 10 |
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