Comprehensive Resources for Agriculture: Topical Questions, Past Papers, and Answers
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Understanding Marginal Revenue and Net Revenue: Analyzing Financial PerformanceDifferentiate between marginal revenue and Net revenue.
Detailed Answer: Differentiating Marginal Revenue and Net Revenue Marginal Revenue and Net Revenue are two important concepts in economics that help in analyzing the financial performance of a business. Let's differentiate between these two terms:
For example, if a business sells 100 units of a product and earns $1,000 in total revenue, and then sells 101 units and earns $1,020 in total revenue, the marginal revenue for selling the 101st unit would be $20 ($1,020 - $1,000). Marginal revenue helps businesses determine the incremental impact on revenue when producing and selling additional units of output.
For example, if a business generates $10,000 in total revenue and incurs $8,000 in production costs and other expenses, the net revenue would be $2,000 ($10,000 - $8,000). Net revenue helps in determining the profitability and viability of a business by considering all costs associated with production. In summary, marginal revenue represents the additional income obtained from the sale of one additional unit of output, while net revenue is the difference between total revenue and total costs of production. Marginal revenue focuses on the incremental impact of selling additional units, while net revenue provides an overall measure of profitability after considering all costs.
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