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AGGREGATE MARKET ANALYSIS: An investigation of macroeconomic phenomena, including unemployment, inflation, business cycles, and stabilization policies, using the aggregate market interaction between aggregate demand, short-run aggregate supply, and long-run aggregate supply. Aggregate market analysis, also termed AS-AD analysis, has been the primary method of investigating macroeconomic activity since the 1980s, replacing Keynesian economic analysis that was predominant for several decades. Like most economic analysis, aggregate market analysis employs comparative statics, the technique of comparing the equilibrium after a shock with the equilibrium before a shock. While the aggregate market model is usually presented as a simply graph at the introductory level, more sophisticated and more advanced analyses often involve a system of equations.
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                           TOTAL REVENUE CURVE: A curve that graphically represents the relation between the total revenue received by a firm for selling its output and the quantity of output sold. It is combined with a firm's total cost curve to determine economic profit and the profit maximizing level of production. The slope of the total revenue curve is marginal revenue. The total revenue curve for a firm with no market control is a straight line. The total revenue curve for a firm with market control is "hump-shaped." A total revenue curve is the relation between the total revenue a firm receives from production and the quantity of output produced. The total revenue curve reflects the degree of market control held by a firm. For a perfectly competitive firm with no market control, the total revenue curve is a straight, positively-sloped line. For firms with more market control, especially monopoly, the total revenue curve is "hump-shaped," increasing, reaching a peak, then declining.Perfect CompetitionPerfect competition is a market structure with a large number of small firms, each selling identical goods. Perfectly competitive firms have perfect knowledge and perfect mobility into and out of the market. These conditions mean perfectly competitive firms are price takers. They have no market control and receive the going market price for all output sold.Total Revenue Curve,
Zucchini Style |  |
A perfectly competitive total revenue curve is displayed in the exhibit to the right. This particular total revenue curve is that for zucchini sales by Phil the zucchini grower. The vertical axis measures total revenue and the horizontal axis measures the quantity of output (pounds of zucchinis). Although quantity on this particular graph stops at 10 pounds of zucchinis, the nature of perfect competition indicates it could go higher. This curve indicates that if Phil sells 1 pound of zucchinis, then he receives $4 of total revenue. Alternatively, if he sells 10 pounds, then he receives $40 of total revenue. Should he sell 100 pounds, then he would move well beyond the graph, with $400 of total revenue. The "curve" is actually a "straight line" because Phil is a price taker in the zucchini market. He receives $4 for each pound of zucchinis sold whether he sells 1 pound or 10 pounds. The constant price is what makes Phil's total revenue curve a straight line. Monopoly, Oligopoly, and Monopolistic CompetitionThe total revenue curve of a firm with market control is a little different that than for perfect competition. The total revenue curve for monopoly illustrates the difference. 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.Total Revenue Curve,
Medicine Style |  |
The total 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 a drug called Amblathan-Plus and thus faces a negatively-sloped demand curve. Larger quantities of output are only possible with lower prices.The vertical axis measures total 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 it receives $10 of total revenue. Alternatively, if it sells 10 ounces (at $5.50 per ounce), then it receives $55 of total revenue. Should it sell 12 ounces (at $4.50 per ounce), then it receives only $54 of total revenue. For Feet-First Pharmaceutical the total revenue "curve" actually is a "curve." The slope of this curve falls as more output is produced, eventually reaching a peak, then becoming negative. The changing slope of this curve is due to the changing price. Although this total revenue curve is based on the production activity of Feet-First Pharmaceutical, a well-known monopoly firm, it can also apply to any firm with market control. Monopolistic competition and oligopoly firms that face negatively-sloped demand curves generate comparable total revenue curve.
Recommended Citation:TOTAL REVENUE CURVE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2015. [Accessed: January 30, 2015].
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State of the ECONOMY
Business Inventories
November 2014
$1,763.6 billion
Up 4.4% from November 2013: Econ. Stat. Admin.
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PINK FADFLY
[What's This?]
Today, you are likely to spend a great deal of time watching the shopping channel looking to buy either a T-shirt commemorating the first day of winter or software that won't crash your computer. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
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"A genius is a talented person who does his homework." -- Thomas Edison
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KCBT
Kansas City Board of Trade
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