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1. Total Revenue:-Total Revenue refers to the gross revenue of the firm. In other words, it is the total amount of money that a firm receives from its sales proceeds. It is expressed as follows:TR = f (Q) Where:TR = Total Revenue Q = Total amount of the goods sold during a period of time. Thus total revenue is the function of total sales. Total revenue can be obtained when the quantity sold is multiplied by the market price of the product. Thus, TR = Q X P Where:Q = Quantity sold P = Price per unit 2. Average revenue:- It refers to revenue per unit. Average revenue is equal to total revenue divided by the number of units sold. It is expressed as follows. AR = TR / Q Where:AR = Average revenue TR = Total revenue Q = Out put 3. Marginal Revenue:-Marginal revenue refers to the net addition made to the total revenue by selling one more units. Thus it is the change in the total revenue resulting form a unit change in the output sold. It can be expressed as follows. MR = TRn – TR n-1 4. Project Planning :- Project Planning involves conceding, Generating, Evaluating & selecting the most profitable investment. It is a plan for investment fund & these with • Determining the worthiness of investment project • Estimating rate of returns from these project. • Estimating the cost of capital & availability of capital funds. 5.

Perfect Competition:- A type of market where there are large number of buyers and sellers and no buyer or seller influences the market individually. Under perfect competition there is free entry and exit of all the firms. There is uniform price under perfect competition. All consumers pay the same price. It is not realistic and it is an imaginary market.

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Monopoly:-

Monopoly is a type of market in which there is only one seller producing a commodity having no close substitute. Under monopoly the entry of new firms is strictly prohibited.

7. Price Discrimination:- Price discrimination refers to a situation when a monopolist charges different prices from different customers for the same commodity at the same time. E.g. BEST charges different prices for consumption of electricity for domestic use and commercial use. Price discrimination is possible only under the following conditions. a. The seller is a monopoly firm. b. There are 2 or more than 2 markets for the product c. No resale possibility for monopoly product.

8. Product Differentiation: Product differentiation is the most important feature of monopolistic competition. Since all sellers sell the product which are perfect substitutes for each other, they go for product differentiation. Every seller makes efforts to show that his product is superior to other products. Product differentiation is practiced in many forms lime advertisement, brands, trademarks, designs, packaging, colour etc. Thus the products are not homogeneous under monopolistic competition. 9. Dumping: - Dumping is a device used by the seller to promote export and capture foreign market. It refers to the sale of goods in foreign market at a given price which is lower than the selling price of the same product in the domestic market. Dumping can be practiced under the following conditions only:• The seller enjoy monopoly in domestic market and • There is perfect competition in the foreign market. • The two different market should have different elasticity of demand. 10. Production cost:- Production cost refers to all the expenses met by the producer in order to produce and shift it to the consumer. Production cost helps to expand supply. It is met by all commodities which are produced and sold. 11. Selling cost:- Selling cost refers to only that cost which is incurred to secure demand. For e.g. expenses on demand. Advertisement, publishing, window, display etc. Selling cost promotes demand and thereby sales. Selling cost is met by all commodities which are sold.

Q. Explain the relationship between price, average revenue and marginal revenue under perfect completion and monopoly.

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Ans. a. Price and revenues under Perfect Competitions. A firm can sell any amount of the product under the given price in perfect competition. As the price is given and fixed, the average revenue and marginal revenue become equal to price. The following schedule explains the relationship between price, average revenue and marginal revenue. Units of Price TR(Rs. MR(Rs.) AR(Rs.) commodity ) 1 10 10 10 10 2 10 20 10 10 3 10 30 10 10 4 10 40 10 10 5 10 50 10 10 Under the conditions of perfect of competition, the firm’s average revenue and the marginal revenue curve would be one and the same. In other words they are identical and represented by a horizontal straight line parallel to X – axis. b. Price and revenues under monopoly:- As there is only one firm under monopoly, it can adopt an independent policy and change the price as it desires. As a result, the price does not remain constant in monopoly. Under such circumstances, the relationship between price and revenues would appear as follows. Units of Price TR(Rs. MR(Rs.) AR(Rs.) commodity ) 1 10 10 10 10 2 9 18 8 9 3 8 24 6 8 4 7 28 4 7 5 6 30 2 6 As the price goes on changing, both the average and marginal revenues continuously fall. However the fall in MR is faster than AR. A firm can sell more goods if it reduces the price. Y Price Reve nue AR MR O

X Out Put 3

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DISTINGUISH BETWEEN Perfect Competition 1. A type of market where there are large numbers of buyers and sellers and no buyer or seller influences the market individually. 2. Under perfect competition there is free entry and exist of all the firms. 3. No Individual seller can influence the price under perfect competition. He is a price taker. 4. A firm and in industry are different under perfect competition. 5. It is hardly exists in the market. 6. There is uniform price under perfect competition.

Monopoly 1. Monopoly is a type of market in which there is only one seller producing a commodity having no close substitute. 2. Under monopoly the entry of new firms is strictly prohibited. 3. Under monopoly, the seller can determine the price and he is a price maker & not a price taker. 4. There is a single firm which acts as the industry. 5. Monopoly exists in the market.

6. There may or may not be practice uniform price by the monopoly. 7. All the consumers pay the different price.

7. All the consumers pay the same price.

Perfect Competition 1. A type of market where there are large number of buyers and sellers and no buyer or seller influences the market individually. 2. There is no product differentiation by the sellers

Monopolistic Competition.

1. There are few sellers

selling same but differentiated product. 2. Product differentiation is the main feature of monopolistic competitions. Products are differentiated on the basis of brand name, shape, colour, design, quantity and workmanship. 3. Sellers are price maker, Different buyers pay different prices for the same product. 4. It is exist in the market.

3. Sellers are price taker and not price maters. All buyers follow uniform price. 4. It is hardly exist in the market.

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Pure competition

Perfect competition. 1. Perfect competition is much wider than pure competition. It‘s features are_

1. Pure competition is said to exist in a market having the following features:a. There are large number of buyers and sellers b. Homogeneous product c. Free entry and exist.

a. There are large number of buyers and sellers b. Homogeneous product c. Free entry and exist d. Perfect mobility of the factors of production. e. Perfect knowledge about the market f. Absence of transport cost. g. No government restrictions.

2. Pure competition is much simpler and less exclusive concept than perfect competition. 3. It is possible to come across pure competition in fields like agriculture. 4. American economists attach greater importance to pure competition.

2. Perfect competition is more exclusive concept involving many assumptions. 3. It is difficult to come across perfect competition in real life. 4. English economists generally emphasis perfect competition.

Production cost

Selling cost

1. Production cost refers to all the expenses met by the producer in order to produce and shift it to the consumer.

1. Selling cost refers to only that cost which is incurred to secure demand. For. eg. Expenses on demand, advertisement, publishing, window, display etc. 2. Selling cost results in creation of demand. Further it does not helps to satisfy existing demand. 3. Selling cost promotes demand thereby sales. 4. Selling cost is incurred by only those who produce and sell differentiated products. 5. Selling cost is a peculiar feature of monopolistic competition only.

2. Production cost results in additional production which creates additional utility. 3. Production cost helps to expand supply. 4. Production cost is met by all commodities which are produced and sold. 5. Production cost is universal and it is faced by all markets including perfect competitions. 6. Production cost influences the position and shape of supply curve

6. Selling cost influence the position and shape of demand curve. 5

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Features of Perfect Competition. Perfect Competition:- A type of market where there are large number of buyers and sellers and no buyer or seller influences the market individually.

Features of Perfect Competition are_ 1. Large number of buyers and sellers:- Perfect competition is a market

where there are large number of buyers and sellers. This feature indicates that both the buyers and sellers do n0t have any major control over the market and they cannot individually influence the market. Thus, it means that quantity supplied by a single seller is so small that it does not affect the market supply and the price of the commodity produced by hid. Similarly, quantity demanded by a single buyer does not influence the total demand and the price of the commodity.

2. Homogeneous products. A commodity produced by different producers is exactly identical in respect of quality, size, price, etc. So a seller has no excuse to charge a higher price for his commodity. The buyer also need not discriminate between the sellers.

3. Complete Market information:- According to this feature both the buyers

and sellers must have the complete knowledge of market, regarding price, demand and supply situations in the market.

4. Free entry and exist:- Perfect competition allows free entry and exist for the sellers of the commodity under consideration. The sellers are free to enter the market at any time as per their wish and they also can quit the market whenever they want. There are no legal restrictions on the closing down of the firm.

5. Perfect mobility of factors of production:-It is an important feature of the

perfectly competitive markets that all the factors of production like labor and capital are perfectly mobile, both geographically and occupationally. If labor and capital are move from one place to another as per the requirement of the market they are mobile geographically. If labor and capital move from one type of job or occupation to other type of job easily which means they are mobile occupationally.

6. No transport Cost:- Perfect competition assumes that there is a absence of transport cost. This is mainly because the seller will have no excuse of transport cost to charge a different price.

Features of Pure Competition.

1. Large number of buyers and sellers:- Pure competition is a market where there are large number of buyers and sellers. This feature indicates that both the buyers and sellers do n0t have any major control over the market and they cannot individually influence the market. Thus, it means that quantity supplied by a single seller is so small that it does not affect the market supply and the price of the commodity produced by hid. Similarly, quantity demanded by a single buyer does not influence the total demand and the price of the commodity.

2. Homogeneous products. A commodity produced by different producers is exactly identical in respect of quality, size, price, etc. So a seller has no

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excuse to charge a higher price for his commodity. The buyer also need not discriminate between the sellers.

3. Complete Market information:- According to this feature both the buyers

and sellers must have the complete knowledge of market, regarding price, demand and supply situations in the market.

Features of Monopoly market. Monopoly:- Monopoly is a type of market in which there is only one seller

producing a commodity having no close substitute. 1. Single Seller:- In this type of market, there is only one seller producing a particular commodity. 2. No substitutes:-Monopoly not only implies a single seller but it also means a single seller producing a commodity having no close substitutes. If the substitutes are available, there will be a competition among the firms. Monopoly means a complete absence of competition. So under monopoly, the commodity has no close substitutes. 3. No distinction between a firm and industry:- Since there is only one seller of a commodity, there is only one firm producing that commodity in the market. So there is no distinction between the concepts of industry and firm under monopoly. 4. No free entry and exist:- In the monopoly market, there are strong barriers to the entry of a new firm in the market. This prevents new firms from entering the market and so there is only one firm producing that commodity. 5. Large number of buyers:- Under monopoly there are large number of buyers in the market who compete with one another. 6. Downward sloping demand curve:- The demand curve of the monopoly firm slopes downward indicating that the monopolist can maximize sales only by reducing the price.

Features of Monopolistic Competition. Monopolistic competition:- Monopolistic competition refers to a market where many sellers sell similar but differentiated product to a large number of buyers. In a monopolistic competition market, many monopolistic firms compete with each other by producing same but differentiated products. For example, companies selling toothpaste products like Colgate, Pepsodent, Close-up, etc. fall under Monopolistic competition. 1. Large number of Sellers:- In a monopolistic competition market, there are large number of sellers. Hence no single seller can control the market supply. Each seller follows his own course of action. In other words each seller is independent. 2. Product differentiation:- Product differentiation is the most important feature of monopolistic competition. Since all sellers sell the product which are perfect substitutes for each other, they go for product differentiation. Every seller makes efforts to show that his product is superior to other product. This differentiation is done through Advertisement, brands, trademarks, designs, packaging, color etc. Thus the products are not homogeneous under monopolistic competition. 3. Selling costs:- One of the unique features of monopolistic competition is its selling cost. Selling cost is the cost incurred by the seller on sales

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promotion activities like advertisement, salesman’s service etc. Selling cost enables the seller to persuade buyers to buy their products than products from other sellers.

4. Large number of buyers:- There are large number of buyers in a 5.

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monopolistic competition market. Thus the buyers purchase goods by choice and not by chance. Free exist and entry:- There is free entry and exist of firms under monopolistic competition. There are no barriers for the firm to enter. Since each firm produces a product which is little different from others, there is no possibility of more firms entering the market. Competition :- Competition under monopolistic market is more as all the firms sell close substitutes. But the competition is in two dimensional: 1. Price Competition under which the firms were compete with each other by reducing their products price. 2. Non-price competition under which they compete through advertisement, and sales promotion activities, etc.

Features of Oligopoly. Oligopoly :- Oligopoly is an important form of imperfect competition. In the word Oligopoly ‘Oligo’ means few and ‘poly’ means seller. Oligopoly therefore refers to the market structure representing few sellers or firms. 1. Few Firms:- Oligopoly is the market in which few firms compete with each other. The simplest model of oligopoly is duopoly. Duopoly is the market structure when only two firms produce and supply the product. For e.g. Coke and Pepsi. 2. Nature of the product: In an oligopoly market, all the few firms produce an identical product. Such an oligopoly market is called Pure Oligopoly. On the other hand, firms with product differentiation constitute imperfect oligopoly. 3. Interdependence of Firms: In an oligopoly market, there is Interdependence among firms. Thus the move made by one firm to reduce price attracts reaction from other firms. 4. Complex market structure:- The oligopolistic market structure is quite complex. Cartel is an example of collusive oligopoly. The non-collusive oligopoly is the other form of complex market structure. 5. Selling cost:- Advertisement is an important method used by oligopolists to gain larger share in the market. The costs incurred on advertisement are selling costs.

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