Submitted By blingyday
Words 522
Pages 3
When owning or managing a business it’s important to keep track of the marginal revenue. The most important factors in showing you if your business is a success are cost, revenue and profit. Revenue can high for a company, but if the costs are high as well a profit won’t show and they will most likely not be able to make it. It’s important for businesses to keep track of their profits and cost’s. The way businesses figure their profit maximization is by determining the price and the number of widgets made to get the highest profit they can for their business. There are two ways of figuring your highest profits, one of which is by Total Revenue/Total Cost method and the other way is Marginal Revenue/ Marginal Cost method.
A1: Looking at Marginal Revenue shows how much profit a business has by selling each extra widget. Marginal Revenue is the change in total revenue coming with a change in quantity of widgets sold. Marginal Revenue is the difference in total revenue minus the difference in quantity.
A2: In the Marginal Revenue/Marginal Cost method, for each unit sold the Marginal profit is equal to the Marginal Revenue less the Marginal Cost. Profit maximization is when Marginal Revenue is equal to the Marginal Cost. To show this, a business compares the amounts that each additional unit sold would add to the total revenue and the total cost.
B: For Company A to find their Marginal Revenue, they would take the difference in total revenue after a widget is produced and divide that by the change in quantity.
B1: In the scenario for Company A, the quantity change is one and the marginal revenue only increases when the first widget is produced. The only increase is when one widget is produced that yields the Marginal Revenue of 150, then subtract by ten when two widgets are made, bringing the marginal revenue to 140, when three widgets are made its...

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...Marginal revenue is the amount added to total revenue by the sale of one more unit, which is equal to the change in total revenue divided by the change in quantity of the units sold. In a purely competitive market marginal revenue is equal to the price of the unit sold. In a pure monopoly marginal cost is always less than the price of the unit. Marginal cost is the additional cost of production of one extra unit. It is equal to the change in total cost divided by the change in output. In the short run, marginal cost is equal to the change in total variable cost divided by the change in output. Profit is the return on entrepreneurial ability; total revenue minus total cost. Profit, in this sense takes into account all the costs of business operation and the wage of the owner or entrepreneur, a wage that needs to exceed the entrepreneur’s ability to just go off and start another business instead of focusing on this one. Anything over the entrepreneur’s wage and the total cost would be considered profit. Profit maximization is the point at which the marginal revenue of each resource is equal to its marginal cost. This is the quantity of each resource that must be employed to maximize profit or minimize loss. A profit maximizing company would use the marginal revenue minus the marginal cost rule to find the point of profit maximization. When output is relatively low the marginal revenue will usually exceed the marginal cost. At high output levels, however, the marginal......

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