Multiple Choice
The supply and demand curves for a product are as follows. What is consumer surplus in this market?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Quantitative Analysis of Consumer and Producer Surplus at Equilibrium
Multiple Choice
Refer to Table 14-4. If the market price is \$10 per unit, what is the average revenue when 4 units are sold?
A
4
B
2.5
C
10
D
40
Verified step by step guidance1
Understand that average revenue (AR) is defined as total revenue (TR) divided by the quantity (Q) sold. Mathematically, this is expressed as \(\text{AR} = \frac{\text{TR}}{Q}\).
Recognize that total revenue (TR) is calculated by multiplying the market price (P) by the quantity sold (Q). So, \(\text{TR} = P \times Q\).
Given the market price \(P = 10\) and quantity sold \(Q = 4\), substitute these values into the total revenue formula to find \(\text{TR} = 10 \times 4\).
Next, use the total revenue value and quantity to calculate average revenue using \(\text{AR} = \frac{\text{TR}}{Q}\).
Interpret the result: since average revenue equals total revenue divided by quantity, and total revenue is price times quantity, average revenue at any quantity in a perfectly competitive market equals the market price.
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