total revenue, average revenue, marginal revenue

Total Revenue, Average Revenue, and Marginal Revenue

Total Revenue

• Total revenue (TR) is the amount of money that a firm receives from selling its output: $TR=P\ast Q$

Average Revenue

• Average revenue (AR) is the revenue per unit of output sold: $AR=TR/Q=P$

Marginal Revenue

• Marginal revenue (MR) is the additional revenue that the firm receives when it sells one more unit of output: $MR=∆TR/∆Q=P$
• Notation note:
  • P: price
  • Q: quantity demanded