Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
    1. DragIT - fixed cost curve
    2. DragIT - variable cost curve
    3. DragIT -cost curves
    4. Step-by-step - Short-run total cost curve
    5. DragIT -revenue curve
    6. DragIT - Revenue curves (1)
    7. DragIT - Revenue curves (2)
    8. PlotIT - Profit maximisation
    9. DragIT - Perfect competition
    10. Step-by-step - perfect competition, short-run supernormal profit
    11. Step-by-step - perfect competition, short-run losses
    12. Step-by-step - perfect competition, firm and industry
    13. DragIT - Monopoly (1)
    14. DragIT - Monopoly (2)
    15. Step-by-step - monopoly
    16. DragIT - Welfare loss under monopoly
    17. Step-by-step - monopolistic competition, short-run
    18. Step-by-step - monopolistic competition, short-run
22. Print View

DragIT - Revenue curves (1)

The demand curve for product Z is drawn below. Drag the orange dot, (located at the origin) to where you think is the correct price and quantity combination that would return maximum total revenue (TR) (as you do this the corresponding marginal revenue curve will appear).

1

Revenue curves What is the price charged by the firm to generate maximum revenue? The maximum revenue will be at a price of £14. The marginal revenue curve should be twice the slope of the demand curve. The demand curve crosses the axis at 14 units and so the MR curve should cross the axis at 7 units of output. This is the point where total revenue is at a maximum (any increase in output will mean negative marginal revenue and therefore a reduction in total revenue). At this level of output, the demand curve shows that the firm is charging a price of £14.

2

Revenue curves What will be the value of the total revenue received by the firm if they choose to maximise revenue? Yes, that's correct. Well done. To maximise revenue the firm will sell 7 units at a price of £14 each. This will give them a total revenue of £98.No, that's not right. To maximise revenue the firm will sell 7 units at a price of £14 each. This will give them a total revenue of £98.Your answer has been saved.