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    Cost and Revenue

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    Waleed Wasti
    This document discusses various measures of cost and revenue. It defines total cost, fixed cost, variable cost, marginal cost, average cost, total revenue, average revenue, and marginal revenue. It provides mathematical formulas to calculate these concepts and shows graphical representations of cost and revenue curves under perfect and imperfect competition. The key points are that total cost equals fixed cost plus variable cost, marginal cost is the change in total cost from producing one more unit, and marginal revenue is the change in total revenue from selling one more unit.

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    Cost and Revenue

    Uploaded by

    Waleed Wasti
    87 views15 pages
    This document discusses various measures of cost and revenue. It defines total cost, fixed cost, variable cost, marginal cost, average cost, total revenue, average revenue, and marginal revenue. It provides mathematical formulas to calculate these concepts and shows graphical representations of cost and revenue curves under perfect and imperfect competition. The key points are that total cost equals fixed cost plus variable cost, marginal cost is the change in total cost from producing one more unit, and marginal revenue is the change in total revenue from selling one more unit.

    Original Description:

    An overview of the different types of costs and revenue. (Powerpoint slides).

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    This document discusses various measures of cost and revenue. It defines total cost, fixed cost, variable cost, marginal cost, average cost, total revenue, average revenue, and marginal revenue. It provides mathematical formulas to calculate these concepts and shows graphical representations of cost and revenue curves under perfect and imperfect competition. The key points are that total cost equals fixed cost plus variable cost, marginal cost is the change in total cost from producing one more unit, and marginal revenue is the change in total revenue from selling one more unit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    87 views15 pages

    Cost and Revenue

    Uploaded by

    Waleed Wasti
    This document discusses various measures of cost and revenue. It defines total cost, fixed cost, variable cost, marginal cost, average cost, total revenue, average revenue, and marginal revenue. It provides mathematical formulas to calculate these concepts and shows graphical representations of cost and revenue curves under perfect and imperfect competition. The key points are that total cost equals fixed cost plus variable cost, marginal cost is the change in total cost from producing one more unit, and marginal revenue is the change in total revenue from selling one more unit.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 15

    COST & REVENUE

    Different Measures of Cost


    Total Cost (TC) = FC+VC
    Fixed Cost (FC) are costs that do not vary with
    output. FC only are present in the short-run are
    the result of fixed factors.
    Variable Cost (VC) are costs that vary with
    output. VC result from different levels of fixed
    factors. All costs are VC in the long-run.
    Mathematically, Total costs can be represented
    as,

    TC = FC +VC

    Total Costs

    TC
    TVC

    Costs (dollars)

    Fixed Cost

    Total
    Cost

    Variable Cost

    TFC
    Quantity
    3

    Marginal & Average costs:


    Marginal Cost (MC) measures the cost of
    producing another unit.
    MC = Change in Total Cost
    Change in Quantity Sold
    MC= TC
    Q
    Average Cost (AC) measures the cost of a
    typical unit of output.
    Mathematically,
    TC/Q = FC/Q + VC/Q
    ATC = AFC +AVC

    Marginal and Average Cost Curves:

    Fixed
    Quantity Cost
    0
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10

    $
    $
    $
    $
    $
    $
    $
    $
    $
    $
    $

    3.00
    3.00
    3.00
    3.00
    3.00
    3.00
    3.00
    3.00
    3.00
    3.00
    3.00

    Variable Total
    Costs
    Costs

    $
    $
    $
    $
    $
    $
    $
    $
    $
    $

    0.30
    0.80
    1.50
    2.40
    3.50
    4.80
    6.30
    8.00
    9.90
    12.0

    $ 3.30
    $ 3.80
    $ 4.50
    $ 5.40
    $ 6.50
    $ 7.80
    $ 9.30
    $ 11.00
    $ 12.90
    $ 15.00

    Marginal
    Costs

    $
    $
    $
    $
    $
    $
    $
    $
    $
    $

    0.30
    0.50
    0.70
    0.90
    1.10
    1.30
    1.50
    1.70
    1.90
    2.10

    Revenue

    Revenue is the money


    payment received from the sell of
    a commodity.

    Types of Revenue
    1. Total Revenue
    2. Average Revenue
    3. Marginal Revenue

    Total Revenue
    TR is defined as the total or aggregate of
    proceeds to the firm from the sale of a
    commodity.
    Symbolically,
    TR = P X Q
    P = Price
    Q = Quantity

    Average Revenue
    Average Revenue is the revenue per unit of
    output sold.
    Symbolically,
    AR = TR
    Q
    Or, AR = P X Q
    Q
    Or, AR = P
    AR is always identical with the price.

    Marginal Revenue
    Marginal Revenue is the revenue received by selling one
    extra unit of output.
    OR
    Marginal Revenue is the addition made to total revenue
    when one more unit of output is sold.
    MR = Change in Total Revenue
    Change in Quantity Sold
    MR = TR
    Q

    Graphical presentation of TR, AR,


    MR under Perfect Competition
    Revenue
    50

    TR

    40
    30
    20
    10
    0

    P=AR=MR=d
    1

    4 5

    Quantity

    Graphical presentation of TR, AR,


    MR under Imperfect Competition
    TR

    TR is maximum
    TR

    O
    AR/MR

    MR=0
    MR

    AR

    Optimal production
    Optimal production(in terms of
    maximizing profits) occurs when the
    marginal cost of an additional input is
    exactly equal to the marginal revenue
    received in response.

    'Economies Of Scale
    Economies of scale is the cost advantage that arises with
    increased output of a product.Economiesof scale arise
    because of the inverse relationship between the quantity
    produced and per-unit fixed costs.
    Economies of scale can be classified into two main
    types:Internal arising from within the company;

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