Egt1, Task1
A. The point or number of units produced at which profit maximization or greatest economic profit is achieved can be determined in 2 ways.
1. The first method is the total revenue (TR) to total cost (TC) method. TR-TC This method uses the highest total revenue (TR) less total cost (TC) to determine at what point the quantity produced maximizes total economic profit. In exhibit 1, the point at which profit maximization is achieved is at the production of 8 units.
2. The second method is the marginal revenue to marginal cost approach. MR=MC This method uses the point at which both marginal revenue and marginal cost are equal to each other to determine at what point the quantity produced maximizes total economic profit. In exhibit 1, the point at which marginal revenue and marginal cost are equal is at the production of 8 units
B. Marginal revenue (MR) is the additional revenue received by producing and selling one more unit. As an example from Exhibit 1 below, the marginal revenue from selling the 8th unit (one more than 7) is $80. As can be seen in exhibit 1 below, marginal revenue (MR) decreases as the number of units produced increases.
C. Marginal cost (MC) as the cost to produce just one more unit. As an example form Exhibit 1 below, The marginal cost (MC) from producing the 8th unit (one more than 7) is $80. As can be seen in exhibit 1 below, marginal cost (MC) increases as the number of units produced increases.
D. Profit maximization occurs in exhibit 1 at 8 units produced. This can be calculated with each method for determining profit maximization. The highest result of TR-TC is $540 at 8 units produced. The point at which MR=MC is $80 at 8 units produced.
E. If the company’s marginal revenue (MR) is greater than marginal cost (MC)[ MR>MC ]. The company should continue to produce more units until marginal revenue (MR) is equal to marginal cost (MC). At this point the company can still create more economic profit by producing more
1. The first method is the total revenue (TR) to total cost (TC) method. TR-TC This method uses the highest total revenue (TR) less total cost (TC) to determine at what point the quantity produced maximizes total economic profit. In exhibit 1, the point at which profit maximization is achieved is at the production of 8 units.
2. The second method is the marginal revenue to marginal cost approach. MR=MC This method uses the point at which both marginal revenue and marginal cost are equal to each other to determine at what point the quantity produced maximizes total economic profit. In exhibit 1, the point at which marginal revenue and marginal cost are equal is at the production of 8 units
B. Marginal revenue (MR) is the additional revenue received by producing and selling one more unit. As an example from Exhibit 1 below, the marginal revenue from selling the 8th unit (one more than 7) is $80. As can be seen in exhibit 1 below, marginal revenue (MR) decreases as the number of units produced increases.
C. Marginal cost (MC) as the cost to produce just one more unit. As an example form Exhibit 1 below, The marginal cost (MC) from producing the 8th unit (one more than 7) is $80. As can be seen in exhibit 1 below, marginal cost (MC) increases as the number of units produced increases.
D. Profit maximization occurs in exhibit 1 at 8 units produced. This can be calculated with each method for determining profit maximization. The highest result of TR-TC is $540 at 8 units produced. The point at which MR=MC is $80 at 8 units produced.
E. If the company’s marginal revenue (MR) is greater than marginal cost (MC)[ MR>MC ]. The company should continue to produce more units until marginal revenue (MR) is equal to marginal cost (MC). At this point the company can still create more economic profit by producing more