Revenue

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					Revenue
               Revenue
 Revenue  is the money receipts from the
 sale of goods and services.
   World‘s biggest firms based on
              revenue.
 1. Wal Mart           $258 billion
 2. Shell
 3. Exxon Mobil
 4. BP
 5. Toyota
       Walmart‘s revenue…
 Greater than the GDP of Nigeria, Portugal
 or Israel.
                Revenue
 Average   Revenue: Total revenue divided
  by sales
 Marginal Revenue: The receipts from
  selling an extra unit of out put.
 If price is constant, average revenue will
  be the same as marginal revenue.
  Farmer selling milk to a dairy
A   farmer receives 50 rappen for every litre
  of milk he sells.
 If he sells 4,000 litres of milk – what is his
  average revenue, marginal revenue and
  total revenue?
Average Revenue = Marginal
         Revenue
       Average Revenue, Marginal
       Revenue when price is not
               constant.
 If the price is not constant, the average
  revenue and marginal revenues are not
  equal. Instead of a milk farmer, consider
  an airline selling tickets on a flight from
  New York to London. They can sell some
  tickets for $600, but others they will have
  to be happy to sell for maybe $300.
 Inthe case of the airline selling tickets, the
  average and marginal revenues will be
  very different.
Average Revenue, Marginal
Revenue when price is not
        constant.
                  Profit
       is the difference between revenue
 Profit
  and costs.
              Normal Profit
 Normal  profit is the minimum level of profit
  needed so that a firm will remain in the
  market.
 Normal profit occurs at the point at which
  the resources available to the firm are
  being efficiently used and could not be put
  to better use elsewhere.
               Normal Profit
 Imagine you invest $100,000 in a business. At
  the end of the business year, you make a `profit`
  of $5,000.
 Accountants consider that a profit.
 However, economists have to consider the
  opportunity cost. What if you could have made
  6% interest on the $100,000?
 You are not making normal profit, so economic
  theory would predict you would not continue in
  business.
                 Profit
    profit maximising point is where
 The
 marginal revenue equals marginal cost.
Marginal Revenue and Marginal
            Cost
 In this market, average revenue is equal to
  marginal revenue. So it is milk, not airline
  tickets.
 Between O and N, the firm is making a
  loss.
 Beyond M, the marginal cost is higher than
  the marginal revenue, so there is no point
  in producing beyond that point. So a profit
  maximising firm will produce at point E.

				
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posted:8/4/2011
language:English
pages:18