Monopoly Revenue

Total Revenue

• Total revenue (TR) is the amount of money that a firm receives from selling its output: $TR=P\ast Q$
• same as Perfect Competition Total Rev, Avg Rev, Mar Rev

Average Revenue

• Average revenue (AR) is the revenue per unit of output sold: $AR=TR/Q=P$
• same as Perfect Competition Total Rev, Avg Rev, Mar Rev

Marginal Revenue

• Marginal revenue (MR) is the additional revenue that the firm receives when it sells one more unit of output: $MR=∆TR/∆Q$ < $P$
  • different from Perfect Competition Total Rev, Avg Rev, Mar Rev as monopolist MR always < P
  • when monopoly drops the price to sell 1 more unit, the revenue it receive also decreases, not additional revenue
  • when monopoly increases the amount it sells → has 2 effects on total revenue (P x Q)
    • output effect - more output is sold, Q is higher
    • price effect - price falls, P is lower
• figure - demand and marginal revenue curve for a monopoly