Marginal Analysis - Egt1 Task1

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309.1.1-05, 06

A. Marginal revenue indicates how much extra revenue a company receives for selling an extra unit of output. 1. Marginal Revenue is the change in total revenue resulting from a change in the quantity of output sold. Expressed as: Marginal Revenue = change in total revenue/change quantity.

B. Marginal cost is the overall change in a firms total cost of production resulting from a change in production by one unit. 1. Marginal cost and total cost are related in terms of the cost of production for manufacturing companies or service providers. Fixed costs and marginal variation in cost are both considered when determining the total cost, so total costs encompass marginal costs.

C. Profit is the surplus remaining after total costs are deducted from total revenue. 1. Profit maximization is the short run or long run process by which a firm determines the price and output level that returns the greatest profit.

D. The monopolist’s profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive firm uses to determine its equilibrium level of output.

E. To produce more products until the last items produced are at the breakeven point. This means you have maximized your production and profits.

F. If the marginal cost is greater than revenues. You must slow down until the last unit produced is at a breakeven point where as the unit cost equals the revenue for that unit.

REFERENCES March 12, 2013. Marginal cost. Retrieved from April 3, 2013. Marginal cost. Retrieved from April 25, 2013. Profit maximization. Retrieved from,articleId-9769.html May...
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