How is average revenue calculated?

Average revenue is calculated by taking total revenue and dividing it by the quantity of goods or services sold. This measure reflects the revenue generated per unit sold, which is crucial for businesses to assess their pricing strategies and overall profitability. The formula can be expressed as:

Average Revenue = Total Revenue / Quantity Sold

This concept is foundational in economics as it helps businesses to understand how much income they earn on average from each unit of their product. For instance, if a company sells 100 units of a product and generates a total revenue of $1,000, the average revenue would be $10 per unit.

The other options represent different calculations that do not directly pertain to average revenue. For example, total cost divided by total quantity involves cost considerations rather than revenue. Similarly, total revenue minus variable costs focuses on profit rather than average revenue, and total cost multiplied by price does not yield useful economic information regarding revenue per unit sold. Understanding average revenue is essential for market analysis and pricing decisions, as it allows businesses to gauge their performance in relation to the number of units sold.