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Marginal Analysis


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In economics, marginal revenue is the revenue that an additionally produced unit will create, if sold. When a company is in a competitive market, the price of the unit sold does not change, so marginal revenue is the price of a single unit. The relationship between marginal revenue and total revenue is calculated when marginal revenue is equal to the change in total revenue divided by the change in quantity, when the change in quantity is equal to a single unit. Mathematically marginal revenue is calculated using the product rule formula of MR = d(TR)/dQ where MR equals marginal revenue, TR equals total Revenue, and Q equals quantity
On the contrary, marginal cost is the cost incurred to create one additional unit. This would include for example the cost of additional equipment if it was needed to produce the additional unit. Marginal cost relates to total cost in that marginal cost is the change in total cost that comes when the number of units produced is increased by one. Total cost is found when adding fixed costs plus variable costs and multiplying by the amount of units produced. Marginal Cost is found by using the calculus formula of MC = dTC/dQ, where MC is equal to marginal cost, TC is equal to total cost, and Q is equal to quantity. Marginal cost is also the slope of the total cost curve when cost and quantity are represented on a graph.

Profit is the amount of money a company makes when the total cost of production is subtracted from total revenue. If the number is positive, the company is making a profit on the units being produced and sold. If the number is negative, the company is losing money producing that unit. When a company tries to achieve maximum profit for units produced, it will calculate what price per unit and level of output will return the greatest profit. This is called profit maximization. One of the two more widely used

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