A Level Economics AQA Practice Exam

What is the formula for total revenue?

1. Cost + Profit

2. Price - Cost

3. Price x Quantity

4. Price + Quantity

The correct answer is: Price x Quantity

The formula for total revenue is commonly defined as the price at which goods are sold multiplied by the quantity of those goods sold. This relationship illustrates that total revenue directly increases as either the price or the quantity of sales increases, making it a fundamental concept in understanding firm revenue in economic analysis. This formula is crucial for firms as it helps them determine how much income they generate before accounting for any costs associated with production or operation. In contrast, other formulas presented do not correctly represent the calculation of total revenue. For instance, calculating cost plus profit, or price minus cost, pertains to different aspects of business finance rather than directly to total revenue. Similarly, adding price and quantity does not yield a measure of revenue but rather a different mathematical interpretation.