What is the formula for calculating average revenue?

Average revenue is calculated by taking total revenue and dividing it by the quantity of output sold. This calculation provides a per-unit measure of revenue generated from sales, making it a key concept in understanding a firm's revenue and pricing strategy. The formula is expressed as:

Average Revenue = Total Revenue / Quantity of Output.

This method highlights how much revenue each unit of output brings to the firm, which is crucial for making informed business decisions regarding pricing and production levels.

The other options do not correctly represent the concept of average revenue. For instance, total costs divided by output pertains to average costs, while average costs multiplied by total output leads back to total costs. Lastly, total profits divided by fixed costs does not provide meaningful information regarding revenue generation at all.