Eco 101

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

The difference between economic profit and business profit is that in economic profit, profit or loss is calculated by subtracting opportunity cost of the inputs from the revenue of sales. Business profit is the difference between the total revenue and total costs incurred to earn that

Objective: Analyze the effect of changes in marginal revenues and costs on a firm’s profit-making potential.

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

So, to summarize with all the information given, Company A should always strive to have their marginal cost be equal to their marginal cost in order to maximize profit. If they see that their marginal revenue is higher than the marginal cost then more output needs to be produced to get their max profit. In contract, if the marginal cost if higher than the marginal revenue then output needs to

In business there are certain factors that have to be evaluated before a company can see if a profit has been made. To even get to the point where a profit will be made there has to be a product that is sold whether it is a tangible or an intangible product. There has to be something that the business is selling in order to make that profit. The amount of profit that is attained is the outcome of the total revenue minus the total cost. This will then show the business what the remaining profit is. Business is like a puzzle, all the pieces have to fit and work together to have the puzzle complete. In business things have to work together or it won’t work and all the hard work that was put in to making

* Implicit—This cost is implicit since it is not money out of the company’s pocket, but it is not applicable since the cost is not relevant.

2.5 Analyze the relationship between productivity and the cost of production. 2.6 Analyze the effect of changes in the supply of and demand for factors of production on the price of inputs. 2.7 Analyze the effect of changes in marginal revenues and costs on a firm’s profit-making potential.

While it is useful to know the quantity of sales at which a product will cease to generate losses, it may be even more useful to know the quantity necessary to generate a desired level of profit, say D.

Parts of opportunity cost are explicit costly (money spent along the project to make it happen, for the task to be done perfectly money and labor need to be involved, e.g. Boss paid workers for their project, students pay tuition to enroll in class and all other amenities involved.) and implicit cost (one’s time value or origin in the next best alternative. The time incorporated in order to run out the next best option).

The cost of something is what you give up to get it. Opportunity cost is defined by

In a business where selling and distribution expenses are quite nominal the cost of an article may be calculated without considering the

Direct costs are costs directly related to producing the products and services of a project. On the other hand, indirect costs are costs not directly related to a project’s products or services, but are indirectly related to performing the project.

This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that

The cost incurred by the function should be compared with the results accomplished e.g. sales volume achieved, gross margins achieved and net realization made.