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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:
* Marginal revenue is additional revenue from producing one more unit of output.
* Marginal cost is additional cost from generating one more unit of output. * Comparing R(q) and C(q)
- Output levels: 0- q0:
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This method is also known as Experts opinion methods of investigation. In this method instead of depending upon the opinion of buyers and salesmen firms can obtain views of the spe
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