...EGT1 – TASK GUIDE INTRODUCTION: As you work on each of the Tasks please make use of the various resources posted and updated within the Business Undergraduate Economics Learning Community Task 1 Recorded Webinar TASK 1: MARGINAL ANALYSIS This Task centers on the competency of marginal analysis with two structured objectives. First is the requirement to describe the relationship between marginal revenue (MR) and marginal cost (MC) at the point of profit maximization. Second is the requirement to explain the concept of profit maximization. ACTIONS OF APPROACH: 1- Prior to turning in the Task, consider attending a Live Webinar on the Task. Students that attend are much more likely to pass the Task. You can always find an updated schedule of Live Webinars in the Community Pages (link at the top of this document). 2- This essay should be relatively short (1-3 pages) and can be written entirely from the concepts discussed within the McConnell e-text. In preparing for this Task you should read Chapters 7-11 of the McConnell e-text, with specific concentration on the information in Chapters 7 & 8. *Chapter 7 "Business and the Costs of Production" *Chapter 8 "Pure Competition in the Short Run" Chapter 9 "Pure Competition in the Long Run" Chapter 10 "Pure Monopoly" Chapter 11 "Monopolistic Competition and Oligopoly" 3- Formulate your responses to this Task in accordance with an “outline” format. More specifically, when writing your paper – list the Task Element and structure your...
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...EGT1 Task 1 Marginal Analysis Student Name Western Governors University Student ID: The primary focus of this paper is to demonstrate the concepts of marginal revenue and marginal cost, how the two are related to each other and how they are used by a company in profit maximization. By factoring, analyzing and comparing the various data on revenue and cost, a company can use a marginal analysis to determine the best direction to maximize profits. A marginal analysis is the “comparisons of marginal benefits and marginal costs, usually for decision making” (McConnell, 2011, p. 6). A. There are two methods to describe profit maximization. Further details of both methods and how each are used to determine profit maximization are as followed: 1. One method of understanding profit maximization is by using the relationship of total revenue and total cost. Total revenue is the total income that a company receives from a product or service. The price multiplied by the quantity of the product or service equates to the total revenue. Total cost is the total expense or cost to a company to produce a product or provide a service. Profit is determined by subtracting the total cost from the total revenue. Initially, as production or quantity increases, profit increases as well. There is a point, however, where the profit will maximize and then begin to diminish as the unit quantity increases. This point is where the greatest profit is realized in relation to the total revenue...
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...EGT1: Economics and Global Business Applications Marginal Analysis By Christine Poole April 12, 2013 Abstract This essay will define marginal revenue, marginal cost, and profit, and it will explain the relationship each has with total revenue, total cost, and it will explain the concept of profit maximization. Marginal Revenue Marginal revenue is “The change in total revenue that results from the sale of 1 additional unit of a firm’s product; equal to the change in total revenue divided by the change in the quantity of the product sold.”(McConnell, C. R., & Brue, S. L., Flynn, S. (2012)). Total revenue is the total receipts of a firm from the sales of any given quantity of a product. It can be calculated as the selling price of the firm’s product times the number of items sold. If the total revenue is zero when zero units are sold, then the first unit of output sold increases total revenue by the selling amount, which is also the marginal revenue amount. The demand for the product will determine whether the marginal revenue is higher, lower or the same as the revenue from the previous unit produced. “While marginal revenue can remain constant over a certain level of output, it follows the law of diminishing returns and will eventually slow down, as the output level increases.” www.investopedia.com/terms/m/marginal-revenue-mr.asp. When marginal revenue equals marginal cost competitive firms will stop producing output. Marginal Cost Marginal cost...
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...EGT1 Task 1 – Marginal Analysis The profit calculation of total revenue and total costs is Profit (P) equals total revenue (TR) minus total costs (TC) and focuses on maximizing this difference. Profit will be maximized when the total revenue, or the amount they would receive by selling that particular widget exceeds the total cost, or the costs associated with making this widget by the greatest amount. The greatest difference between these two is considered the profit.The profit calculation of marginal revenue to marginal costs is different where the company will compare the marginal revenue (MR) they would receive from selling one more widget to the marginal cost (MC) of producing that additional widget, and how much cost it would add to the total revenue and total costs. Profit maximization occurs when the marginal revenue received from the widget is the same as the marginal cost of producing the widget.Marginal revenue is calculated by dividing the change in total revenue (TR) by the change in quantity (Q) sold, which is calculated as ΔTR/ΔQ (MR = ΔTR/ΔQ) (Gish). Another way to figure marginal revenue is to take the total revenue of a particular quantity of widgets and subtracting the total revenue of one less widget. Quantity | TR | MR | 0 | $0.00 | $0.00 | 1 | $150.00 | $150.00 | 2 | $290.00 | $140.00 | 3 | $420.00 | $130.00 | 4 | $540.00 | $120.00 | 5 | $650.00 | $110.00 | 6 | $750.00 | $100.00 | 7 | $840.00 | $90.00 | 8 | $920.00 ...
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