Marginal Analysis

Topics: Economics, Cost, Marginal cost Pages: 2 (551 words) Published: March 18, 2013
Marginal Analysis Task 1

Marginal Revenue
Marginal revenue is the net amount made from total revenue, divided by the number of additional units that are sold. This revenue is based on the demand of the product. When additional units are sold and the revenue generated is positive then the total revenue will increase. In case where the units are produced by monopolies, the marginal revenue is different, marginal revenue usually decreases. In order for a monopoly to sell additional units, they must decrease the price of the units sold, resulting in loss of revenue. Marginal revenue also follows a curve, this curve is based on several factors such as income, the rate the goods are sold, any substitution of goods, etc. These changes are also the same ones that factor into the demand curve. The relationship between total and marginal revenue can be seen the examples below: With marginal Revenue as the total as the number of units increases sold that generates positive marginal revenue, total revenue increases. Total revenue increases when marginal revenue is positive. If Marginal Revenue is zero, total revenue will not change, at this point total revenue is maximized. If marginal revenue is negative, total revenue decreases. Marginal revenue is negative when the cost is greater than selling price. Marginal Cost and Total Cost

Marginal cost is the additional cost of producing an additional unit. Marginal cost (MC) = d (total economic cost)/ d (output) t. Total cost is the sum of fixed costs and variable costs. When an additional unit is added, total changes, the marginal costs will then increase. For example, if I was to sell 25 units and the cost is $50 USD to produce and I wanted to add an additional unit. I would see a cost increase of $55 by producing 26 units, showing a marginal cost of $5 for the 26th unit. Profit and Profit Maximization

Profit is the amount of fund a company or owners are left with after the expenses have been deducted from...
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