Production And Costs

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Revenue: Revenue of a firm is its money receipts from the sale of its product. A firms generally conducts its activities with the objective of maximising its profit and thus attain equilibrium.

Average Revenue: It is the revenue per unit of commodity sold.   
               AR =  Total Revenue/No of units sold.

Marginal Revenue: MR is the addition to the total revenue by selling an additional unit of output.

General Relationship between TR and MR:

1. When MR is positive (i.e. above zero), TR increases.
2. When MR is zero, TR is maximum.
3. When MR becomes negative (i.e. below zero), TR decreases.

General Relationship between AR and MR:

1. AR increases as long as MR is higher than AR. Alternatively when MR > AR, AR increases.
2. When MR = AR, AR is maximum.
3. When MR < AR, AR falls.

Total Revenue: TR may be defined as the total money receipts of the firm from the sale of its total output.
                   TR = Price Per Unit x Number of units sold.