average revenue product

average revenue product

the total REVENUE obtained from using a given quantity of VARIABLE-FACTOR INPUT to produce and sell output, divided by the number of units of input. The average revenue product of a factor is given by the factor's AVERAGE PHYSICAL PRODUCT multiplied by the AVERAGE REVENUE or PRICE of the product. The average revenue product, together with average cost, indicates to a firm how many factor inputs to employ in order to maximize profit in the SHORT RUN. See MARGINAL REVENUE PRODUCT.
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