Marginal revenue, marginal cost & profit maximization, Microeconomics

Marginal Revenue, Marginal Cost & Profit Maximization

* Determining profit maximizing level of output

- Profit (π ) = Total Revenue - Total Cost

- Total Revenue (R) = Pq

- Total Cost (C) = Cq

- Therefore:

1303_marginal revenue3.png

449_marginal revenue.png


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Marginal Revenue, Marginal Cost & Profit Maximization

* Marginal revenue is additional revenue from producing one more unit of output.

* Marginal cost is additional cost from generating one more unit of output.

1274_marginal revenue2.png

* Comparing R(q) and C(q) 

- Output levels: 0- q0:                        

  • C(q)> R(q)
Posted Date: 10/12/2012 5:15:26 AM | Location : United States







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