Google
Monday 
November 4, 2024 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
ABILITY-TO-PAY PRINCIPLE: A principle of taxation in which taxes are based on the income or resource-ownership ability of people to pay the tax. The income tax collected by our friends at the Internal Revenue Service is one of the most common taxes that seeks to abide by the ability-to-pay principle. In theory, the income tax system is set up such that people with greater incomes pay more taxes. Proportional and progressive taxes follow this ability-to-pay principle, while regressive taxes, such as sales taxes and Social Security taxes, don't.

Visit the GLOSS*arama


AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITION:

A curve that graphically represents the relation between average revenue received by a monopolistically competitive firm 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 monopolistically competitive firm's output.
Monopolistic competition is a market structure with a large number of relatively small firms that sell similar but not identical products. Each firm is small relative to the overall size of the market such that it has some market control, but not much. In other words, it can sell a wide range of output at a narrow range of prices. This translates into a relatively elastic demand curve. If a monopolistically competitive firm 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, such as monopolistic competition, the average revenue curve is negatively-sloped.

Average Revenue Curve,
Sandwich Style
Average Revenue Curve, Monopolistic Competition
The average revenue curve for Manny Mustard is displayed in the exhibit to the right. Key to this curve is that Manny Mustard is a monopolistically competitive seller of sandwiches 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 (number of sandwiches). Although quantity on this particular graph stops at 10 sandwiches, it could go higher.

This curve indicates that if Manny Mustard sells 1 sandwich (at $5.20 per sandwich), then average revenue is $5.20 per sandwich. Alternatively, if he sells 10 sandwiches (at $4.75 per sandwich), then average revenue in is $4.75 per sandwich.

For Manny Mustard 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 Manny Mustard, a well-known monopolistically competitive firm, they apply to any firm with market control. Monopoly and oligopoly firms that also face negatively-sloped demand curves generate comparable average revenues.

<= AVERAGE REVENUE CURVEAVERAGE REVENUE CURVE, MONOPOLY =>


Recommended Citation:

AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: November 4, 2024].


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


Related Websites (Will Open in New Window)...

     | U.S. Chamber of Commerce | Better Business Bureau | Small Business Administration |


Search Again?

Back to the WEB*pedia


APLS

PINK FADFLY
[What's This?]

Today, you are likely to spend a great deal of time flipping through the yellow pages looking to buy either a large flower pot shaped like a Greek urn or a small palm tree that will fit on your coffee table. Be on the lookout for mail order catalogs with hidden messages.
Your Complete Scope

This isn't me! What am I?

The Dow Jones family of stock market price indexes began with a simple average of 11 stock prices in 1884.
"Kites rise highest against the wind, not with it. "

-- Winston Churchill, British prime minister

NAA
National Association of Accountants
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2024 AmosWEB*LLC
Send comments or questions to: WebMaster