A firm in an exceedingly competitive market wants to maximise profits similar to the other firm. The profit is that the difference between a firm’s total revenue and its total cost. For a firm operating during a perfectly competitive market, the revenue is calculated as follows:
Total Revenue = Price * Quantity
AR (Average Revenue) = Total Revenue / Quantity
MR (Marginal Revenue) = Change in Total Revenue / Change in Quantity
The average revenue (AR) is that the amount of revenue a firm receives for every unit of output. The marginal revenue (MR) is that the change in total revenue from a further unit of output sold. For all firms during a competitive market, both AR and MR are adequate the worth.
In order to maximise profits in an exceedingly perfectly competitive market, firms set marginal revenue capable price (MR=MC). MR is that the slope of the revenue curve, which is additionally adequate the demand curve (D) and price (P). within the short-term, it's possible for economic profits to be positive, zero, or negative. When price is larger than average total cost, the firm is making a profit. When price is a smaller amount than average total cost, the firm is making a loss within the market.
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