How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
The total revenue (TR) of a firm is defined as the market price of the good multiplied by the quantity of output sold by the firm. If the market price is denoted by 'p' and the quantity sold is 'q', the total revenue is calculated as the product of these two variables.
This relationship is expressed algebraically as TR = p × q. It implies that a firm earns revenue by selling the good it produces, and the total revenue depends directly on the price per unit and the number of units sold.
In a perfectly competitive market, the firm acts as a price-taker. Since the market price remains constant, the TR curve is an upward-rising straight line passing through the origin, indicating that total revenue increases as output increases.
Explanation
The provided context explicitly defines the relationship in the section '4.2 REVENUE'. It states that total revenue (TR) is the market price (p) multiplied by the firm's output (q). The formula TR = p × q is the core of the relationship. Additionally, the context notes that for a price-taking firm, the TR curve is a straight line starting from the origin because price is constant.