Final answer:
Multiplying product price by output gives the total revenue for a firm. Total revenue is calculated as Price × Quantity and is key for analyzing a firm's sales before deducting costs and expenses.
Step-by-step explanation:
Multiplying the product price by the output reveals the total revenue that a firm would receive from selling its products. This calculation is a fundamental concept in microeconomics and business, providing insights into a company's sales performance. By multiplying the price at which goods are sold by the quantity of goods sold, a business can ascertain its total income from sales before costs and expenses are deducted.
The formula to calculate total revenue is thus: Total Revenue = Price × Quantity. This is in contrast to calculating average total cost, where total cost is divided by the total output at each different level of output. Understanding these different financial metrics allows a firm to make important pricing and production decisions, especially in determining if they are making a profit, which occurs when average total costs are lower than the market price.