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July 16, 2018 

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WORKERS' COMPENSATION: A government-run insurance program that provides benefits to workers injured on the job. Funding for these benefits come from premiums paid by employers. The federal government mandates the program, but it's administered by each of the states. This creates a great deal of diversity, with some states having good benefits and high premiums (sort of pro labor), while others have lousy benefits and low premiums (pro business). In addition to differences among states, premiums also differ based on a business's historical record of accidents. Those companies with a higher number of industrial accidents pay more in premiums than those with fewer accidents.

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AVERAGE REVENUE CURVE, MONOPOLY:

A curve that graphically represents the relation between average revenue received by a monopoly for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a monopoly's output.
Monopoly is a market structure with a single firm selling a unique good. As the only firm in the market, monopoly is a price maker and has extensive market control, facing a negatively-sloped demand curve. If a monopoly wants to sell a larger quantity, then it must lower the price.

The average revenue curve reflects the degree of market control held by a firm. For a perfectly competitive firm with no market control, the average revenue curve is a horizontal line. For firms with market control, especially monopoly, the average revenue curve is negatively-sloped.

Average Revenue Curve,
Medicine Style
Average Revenue Curve, Monopoly
The average revenue curve for Feet-First Pharmaceutical is displayed in the exhibit to the right. Key to this curve is that Feet-First Pharmaceutical is a monopoly provider of Amblathan-Plus and thus faces a negatively-sloped demand curve. Larger quantities of output are only possible with lower prices.

The vertical axis measures average revenue and the horizontal axis measures the quantity of output (ounces of medicine). Although quantity on this particular graph stops at 12 ounces of medicine, it could go higher.

This curve indicates that if Feet-First Pharmaceutical sells 1 ounce of medicine (at $10 per ounce), then average revenue is $10 per ounce. Alternatively, if it sells 10 ounces (at $5.50 per ounce), then average revenue in is $5.50 per ounce. Should it sell 12 ounces (at $4.50 per ounce), then average revenue is $4.50 per ounce.

For Feet-First Pharmaceutical the average revenue curve is also the demand curve. The curve is negatively sloped, meaning that larger quantities of output result in less average revenue.

Although this average revenue curve, and preceding table of average revenue numbers, is based on the production activity of Feet-First Pharmaceutical, a well-known monopoly firm, they apply to any firm with market control. Monopolistic competition and oligopoly firms that also face negatively-sloped demand curves generate comparable average revenues.

<= AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITIONAVERAGE REVENUE CURVE, PERFECT COMPETITION =>


Recommended Citation:

AVERAGE REVENUE CURVE, MONOPOLY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: July 16, 2018].


Check Out These Related Terms...

     | average revenue | average revenue, monopoly | average revenue curve, perfect competition | average revenue curve, monopolistic competition | total revenue curve, monopoly | marginal revenue curve, monopoly | average total cost curve | average product curve |


Or For A Little Background...

     | price | market structures | monopoly | monopoly characteristics | monopoly, demand | perfect competition | oligopoly | monopolistic competition | demand | demand price | law of demand |


And For Further Study...

     | short-run production analysis | short-run analysis, monopoly | long-run analysis, monopoly | monopoly, efficiency | monopoly, breakeven output | profit curve, monopoly | short-run production alternatives, monopoly | monopoly, profit maximization |


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