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Unit 6: Production Theory
Notes
Total Revenue Curve
6.6.2 Average Revenue (AR)
Average revenue is the revenue received for selling a good per unit of output sold. It is calculated
by dividing total revenue by the quantity of output, i.e.
AR= TR/Quantity
Average revenue often goes by a simpler and more widely used term- price. Using the longer
term average revenue rather than price provides a connection to other related terms, especially
total revenue and marginal revenue. When compared with average cost, average revenue shows
the amount of profit generated per unit of output produced. Average revenue is often shown by
an average revenue curve, shown in Figure 6.6.
Figure 6.6: Average Revenue Curve (Under Perfect Market)
LOVELY PROFESSIONAL UNIVERSITY 99
