# 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
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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 views: 10 posted: 8/4/2011 language: English pages: 18
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