Question

Table 1

Quantity Total Revenue

0 $0

1 $5

2 $10

3 $15

4 $20

Refer to Table 1. For this firm, the average revenue is

$0.00

$5.00

$15.00

$20.00

Answer 1

Answer- $5.00

Average revenue is the amount of revenue earned per unit of product sold. It is the per unit revenue from the sale of one unit of commodity. Average revenue is calculated as-

Average revenue= Total revenue/Quantity.

When quantity 0, total revenue=$0.

So, average revenue= -

When quantity= 1unit, Total revenue= $5

So, average revenue= $5/1 = $5

When quantity= 2 units, Total revenue=$10

So, average revenue= $10/2 = $5.

When quantity= 3 units, Total revenue= $15

So, average revenue= $15/3 = $5.

When quantity= 4 units, Total revenue= $20

So, average revenue= $20/4 = $5.

Hence, we can see that at every level of output, average revenue for the firm is same $5.00 . It implies that each unit of good is sold at the same price. When all the units of the good are sold at the same price, the average revenue is same at each level of output.

$0 is incorrect because average revenue at each level of output is $5.00. Total revenue at output zero is $0. Not average revenue.

$15.00 is incorrect because $15.00 is the total revenue earned from the sale of 3 units of output. It is not the average revenue earned from the sale of 3 units.

$20.00 is incorrect because $20.00 is the total revenue earned from the sale of 4 units of output. It is not the average revenue earned from the sale of 4 units of output.