In order for a company to be able to reach its full potential financial management must be in place. This management needs to be aware of at least the basics of financial plans which are revenue, cost and profit. These three things can make or break a company. Each of these things must be understood and considered before plans can be laid to create or better a company.

Revenue is the amount a company receives (Marginal Revenue, 2009). If a company is in the business of sales, revenue is the amount of money the company receives per unit sold. Marginal revenue is the amount of money a company receives for the last unit sold. This is found by dividing the change in revenue by the change in quantity sold. For companies that compete with one another marginal revenue is not very important. This is because in a competitive environment most products are sold at a set price so that marginal revenue is equal to the set sales price of the product. For a monopoly on the other hand, marginal revenue is very important. Monopolies have a decreasing marginal revenue curve (marginal Revenue, 2009); for a monopoly the marginal revenue is less than the sales price. This is because a monopoly must have a lower sales price in order to increase the amount of product sold.

Total cost is the amount of money it costs to operate at a particular rate of production (Baker, 2000). There are two types of cost: variable and fixed. Fixed costs are those that remain the same regardless of production and variable costs are those that change with production. Marginal cost is the addition either to total cost or total variable cost resulting from one more unit of output (McConnall & Brue, 2008). Usually this is found by dividing the change in total cost by the change in quantity.

Profit is the positive gain from an investment or business operation after subtracting expenses (Profit, 2009). Profit maximization is the idea that people will try to create as high a profit as...

...3.05 Marginal Cost Analysis
Name:______________________________________________
Step One: Launch the data generator to get started (located in the last page of the lesson, or use the numbers given below:
Quantity
Price (in whole dollars)
Total RevenueMarginalRevenue
Total Cost
Marginal Cost
Profit (or loss)
0
42
0
35
1
41
41
68
2
40
80
94
3
39
117
107
4
38
152
114
5
37
185
129
6
36
216
180
7
35
245
235
8
34
272
296
Step Two: Determine a product market (a specific good or service) appropriate to the prices listed. This will be the title of your graph and data table. You will be creating a graph on Step Four.
Step Three: Calculate the marginalrevenue, marginal cost, and profit for each quantity level. Fill in the data table. Use the Case Study presentation at the bottom of the lesson page in 3.05 for step by step instructions on how to calculate your figures. This case will also help you construct your Step Four.
o Total Revenue = Quantity x Price
o Total Cost = Fixed Cost + Variable Cost
o Profit or Loss = Total Revenue – Total Cost
o ―Marginal means additional
o MarginalRevenue is computed by finding the difference of the previous two quantities (total revenue of pair #2 - #1)...

...review before knowing the maximum profit that can be obtained for their industry. Marginalrevenue, marginal cost, total cost and profit-maximizing are some of the concepts that are analyzed when making business production decisions.
Marginalrevenue is the total revenue that is changed when one more unit of output is produced. The total revenue is determined by multiplying the unit price by what quantity the company can sell. The total revenue increases when the first unit is purchased and equals the marginalrevenue. When the second unit is produced, the total revenue will increase, but the marginalrevenue will stay at the same original cost. Marginalrevenue and price will remain equal in a pure competition market when the first unit is sold. Marginalrevenue is equal to the change in total revenue over the change in quantity when the change in quantity is equal to one unit. When the second unit is sold, marginalrevenue will stay the same and total revenue will double in cost. When selling another unit increases total revenue, the marginalrevenue must be greater than zero. When marginal...

...Marginal Analysis and Profit Maximization
Task A
At the point of profit maximization within any firm, the aspects of both marginalrevenue and marginal cost play a major role. The economically working definition of marginalrevenue is termed as: the extra revenue that an additional unit of product will bring. It is the additional income from selling one more unit of a good; sometimes equal to price (MoneyTerms, 2005). The marginalrevenue of the output of any given product ties closely in the total revenue, because, dependent upon the final amount of additional units sold, the total revenue of a product can be determined. A fluctuation in the marginalrevenue is equivalent to the final calculated total revenue. Businesses establish and define total revenue by multiplying the price of an item for sale by the number of items that sold. Demand for products, which can be elastic, affect the total revenue of the companies that sell those items. Marginalrevenue looks at changes in total revenue and the change in quantity sold. MarginalRevenue = (Change in total revenue) divided by (Change in quantity sold). For example, assume you sell...

...MarginalRevenue and Marginal Cost
An understanding of marginalrevenue and marginal cost is economically crucial to owning and operating a successful business. Marginalrevenue is the amount of change in total revenue by selling one additional product. So if a company sells four extra unit of product and brings extra total revenue of 500 dollars than the marginalrevenue for this month would be 125 dollars. This is found by taking the change in total revenue, 500 dollars, and dividing it by the change in quantity, 4 units of product. This gives you the marginalrevenue which can help a company understand what each unit is worth and how much they will be making for each extra unit.
Marginal cost is how much it cost the company to produce one more product. A company calculates the marginal cost by taking the change in total cost and dividing it by the change in quantity. If it cost a company 400 dollars to produce eight units and it cost a company 425 dollars to produce nine units than the marginal cost for making product nine is 25 dollars.
Finding a profit and understanding when you are earning a profit is crucial because this defines how much your company with gross every month. To find the...

...SD – MBA 2
Personal Report
Name: Thuy Anh Nguyen
November 6,2012
1. Conditions for profit maximization are:
a) Difference between total revenue (TR) and total cost (TC) is maximized;
b) Marginalrevenue (MR) should be equal to marginal cost (MC)
Explanations: If we assume that the company is facing a downward – sloping curve and it produces just one single product
a) Profit = TR – TC.Profit will increase if TR increases and TC decreases. If company wants profit maximization, it should be TR maximization and TC minimization. The maximized difference between TR maximization and TC minimization is profit maximization.
b) MR = MC
- This comes from the function: Marginalprofit = marginalrevenue (MR) - marginal cost (MC). When MR is more than MC, marginalprofit is positive, when MR is down to the extent that it is smaller than MC, marginalprofit is negative. When marginalprofit is too positive (that’s meant the price is too high, or too negative (that’s meant the price is very low, thus the quality is thought to be bad), it gets a maximum where MR = 0.
- If we illustrate in a figure , this only happens at the point where MR cuts MC. The total profit area is...

...forgone. It can be defined as the revenue or the profit that a person/organization would have been able to earn if it had exercised the alternative decision instead of the decision that has been made.
Opportunity-cost has many practical business applications, because opportunity costs will exist as long as resource scarcity exists. The value of the next-best alternative should be considered when choosing among production possibilities, calculating the cost of capital, analyzing comparative advantages, and even choosing which product to buy or how to spend time.
2. *(a) what is Marginal Analysis? (b) Why Is Marginal Analysis Important in Economics? (c) What is the role of Marginal analysis?
Marginal Analysis is the process of considering small changes in a decision (control variable) and determining whether a given change will improve the ultimate objective this technique is widely used in business decision-making and ties together much of economic thought
The process of identifying the benefits and costs of different alternatives by adding one extra unit of any input variable (raw materials, Machines and workers etc.) but others factors should be remaining constant. This is the very useful tool for evaluating the alternative in the process of effective Decision making process
Importance
Marginal analysis supports decision making based on...

...demand for your firm's product
is P = 78 - 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants
are MC1 = 3Q1 and MC2 = 2Q2. How much output should be produced in plant 1 in order to maximize
profits?
A. 1
B. 2
C. 3
D. 4
2.
You are the manager of a firm that produces output in two plants. The demand for your firm's product
is P = 78 - 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are
MC1 = 3Q1 and MC2 = 2Q2. What price should be charged to maximize profits?
A. $20.5
B. $40.5
C. $60.5
D. $80.5
3.
You are the manager of a firm that produces output in two plants. The demand for your firm's product
is P = 78 - 15Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are
MC1 = 3Q1 and MC2 = 2Q2. What price should be charged in order to maximize revenues?
A. $39
B. $47
C. $52
D. $56
4.
Which of the following is true under monopoly?
A. Profits are always positive.
B. P > MC.
C. P = MR.
D. All of the choices are true for monopoly.
5.
You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's
cost function is C = 40 + 5Q2. The profit-maximizing output for your firm is:
A. 4/5.
B. 10.
C. 5.
D. 45.
6.
You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's
cost...