Answer to Question #180617 in Accounting for Durgesh

Question

Total Revenue and Marginal Revenue. Also, explain the relationship between AR and MR?

Answer 1

Total revenue is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices. Marginal revenue is the increase in revenue from selling one additional unit of a good or service.

MR​ = ΔTR/ΔQ

AR remains same at all level of output and is equal to MR. As a result, demand curve or AR curve is perfectly elastic. When a firm is able to sell more output at the same price, then AR = MR at all levels of output.