Firms Have Several Different Concepts of Revenue: Total Revenue, Average

question 82

Multiple Choice

Firms have several different concepts of revenue: total revenue, average revenue, marginal revenue, and price. For a perfectly competitive firm, which statement below is true?

• A) Only average revenue and price are equal.
• B) Total revenue, average revenue, marginal revenue, and price are all equal.
• C) Only marginal revenue and price are equal.
• D) Average revenue, marginal revenue, and price are equal.
• E) None of these revenues are equal.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with the level of production or sales, including rent, salaries, and insurance premiums.

Contribution Margin Ratio

A financial metric that indicates the portion of sales revenue that exceeds variable costs, expressed as a percentage of total sales.

Fixed Expenses

Fixed expenses are costs that do not change with the volume of output, such as rent or salaries, providing stability in financial planning but requiring effective budget management.

Net Income

The total profit of a company after deducting all expenses, taxes, and losses, indicating its financial performance over a period.