Egt1 Task 1

991 Words4 Pages
EGTI Task 1 Marginal Analysis In order for any business to be successful they would need to know how to make the most profit for the goods they are producing and selling. In this paper I am going to explain some of the key terms that companies need to keep in mind when operating their business. First, we will start with marginal revenue, which is defined simply as the extra revenue that is made for each additional unit of a product that is sold. This is directly related to marginal cost, which is what it costs the company to make that additional unit of product. Next there is total cost and total revenue. Total cost is what the company spends to produce a certain quantity of its product. This includes the cost of all the materials,…show more content…
As you can see by the chart if the company were to produce an additional unit after 8 it would mean the marginal cost would be more than the marginal revenue causing the company to be losing money. Looking at it from total revenue to total cost point of the view; the profit from 8 widgets is $540 but if you produce one more is drops to $520, so again this shows where the company has hit their profit maximization mark. 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

More about Egt1 Task 1

Open Document