For many, the principle “marginal revenue equal marginal cost" condition for profit maximization is rather confusing. Discuss the rationale behind the condition, highlighting how different it is from the break-even analysis

For many, the principle “marginal revenue equal marginal cost" condition for profit maximization is rather confusing. Discuss the rationale behind the condition, highlighting how different it is from the break-even analysis

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter22: Getting Divisions To Work In The Firm’s Best Interests

Section: Chapter Questions

Problem 8MC

See similar textbooks

Related questions

Q: Find the marginal revenue function for the total revenue function given by 1 TR(Q) = 500Q- Find the…

A: a)TR(Q)=500Q-13Q3Now,MR=∂TR∂QMR=∂(500Q-13Q3)∂QMR=500-33Q3-1MR=500-Q2

Q: A two-product firm faces the following demand and cost functions: Qi = 40 – 2P, - P2 (0) Find the…

Q: The profit maximizing condition for a purely competitive firm is when... Group of answer choices…

A: A perfect competition is a structure of a market in which there are many sellers and buyers. The…

Q: a. Compute the total variable cost b. Compute the total fixed cost c. Compute total cost (TC)…

A: The given information includes the fixed costs of the XY Company, the variable costs per unit of the…

Q: The management of a manufacturing company has the following information: Revenue function: R = 1500Q…

A: Answer: Given, Revenue function: R=1500Q-15Q2 Profit maximizing price = OMR 900 (a). Calculation of…

Q: Road Runner Co is a Pakistani manufacturer making Bicycles. It exports to two markets, Bangladesh…

A: Solution a)Company's total profit function is given by :π (Q) = Total Revenue - Total Cost…

Q: Given the total revenue and the total cost function in # 18, the corresponding marginal revenue is…

A: The firms, and businesses in the market tend to operate as sellers. These firms make various goods,…

Q: marginal revenue equal marginal cost" condition for profit maximization is rather confusing. Discuss…

A: The condition for the producer equilibrium is : MC=MR where, MC= marginal cost MR= marginal revenue…

Q: TRUE of FALSE Cost- plus pricing is circular for the manufacturing industry in that demand must be…

A: Cost-plus is a pricing method which uses to secure margin by fixing mark-up. The manufacturing firm…

Q: For a certain product, the linear demand curve is described by the equation, Quantity = 10,528 - 474…

A: Marginal revenue can be defined as the additional revenue generated from the sale of an additional…

Q: Consider the total revenue function, TR = 28 + 7Q + 7Q^2 Find the marginal revenue (MR) at Q= 15.…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Crowdsourcing affects new product development by: Group of answer choices: A) providing a…

A: Crowdsourcing a process related to product development that includes accessing or allowing groups of…

Q: Which of the following statements NEITHER describes, NOR is the result of, Increasing Returns to…

A: Increasing returns to scale refers to decrease in average cost of production with increase in…

Q: MA Training (MAT) is a national organisation which provides private tuition courses in accounting.…

A: Performance measures for MAT MAT provides tution courses in the subject of accounting.For the…

Q: Recall that profit equals revenue minus cost. For the revenue and cost functions shown, answer…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Spinners World is a fitness equipment company that manufactures spin bikes. The market research…

A: a) demand equation: x = 35000 - 50 p bringing 50p to the other side, we get 50p + x = 35000 taking…

Q: A two - product firm faces the following demand and cost functions: Q1 = 40 - 2P1 - P2 Q2 = 35…

A: We have demand function in terms of price, Q1 = 40 – 2P1 – P2 Q2 = 35- P1 – P2 We need to find the…

Q: Q3. The management of a manufacturing company has the following information: Revenue function: R =…

A: since you have asked multiple questions and according to our policy we can only provide answer for…

Q: A two product firm faces the following demand and cost functions: Q1 = 40 - 2P1 - P2 Q2=…

A: Given: The demand function for a product is: Q1 = 40 - 2P1 - P2Q2 = 35 - P1 - P2 And the cost…

Q: Find the optimal output to maximize profit given that revenue function is TR = 9000Q − 207q2 and…

A: When money generated from a business activity exceeds the expenses, costs, and taxes involved in…

Q: A firm has $200 million in total revenue and explicit costs of $190 million. Suppose its owners have…

A: Opportunity cost =10% of $100=$10 Economic profit =total revenue - total cost(explicit + implicit)…

Q: In a highly competitive market, we generally find very low Lerner Index values. Those market are…

A: Learner index: It is used to measure the market power of firms. Its value ranges between 0 to 1. It…

Q: Marketers strive to deliver a profitable product for their firm. Marketers must understand…

A: The break-even point refers to the price where there is zero profit i.e., total revenue is equal to…

Q: The simple case of pricing with market power assumes (a) all consumers are charged the same price,…

A: Price discrimination may be a promoting approach within which a merchant charges varied costs for…

Q: A firm has fixed costs of $80,000 associated with the manufacture of lawn mowers that cost $200 per…

A: Total cost is the sum of Fixed and variable cost. Total revenue is price multiplied by quantity.…

Q: Nintendo, a leading manufacturer of video games is about to introduce four new games. The…

A: The factors of production are the elements employed in the production process by the enterprise in…

Q: Q.Many firms depend on the opinions and experiences of others in evaluating a new business proposal…

A: Opinions / views of customers and other companies help the new companies to stay ready with their…

Q: How many of the following will occur with a linear total revenue curve? (i) A linear cost curve (ii)…

A: Total revenue refers to the value of all the goods and services sold in the market. The total…

Q: Dalahla Company Limited, focusing on producing tooth paste (in units) has a demand function 4Q = 35…

A: The demand function can be represented as follows. Total revenue can be calculated as follows.…

Q: product for their firm. Marketers must understand break-even point calculations and sales targets.…

A: Formula: Profit = (Selling price*units sold) - (fixed cost + (variable cost * units sold)

Q: The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of…

A: By increasing the lump sum tax, the: Average total cost will increase. Average fixed cost will…

Q: Evaluate the view that the main goal of firms will always be cost minimization. 2. You are…

A: 1. Every organization works with the primary motive of maximizing its profit. In order to maximize…

Q: A producer faces a fixed cost of Rs. 50 and a variable cost Rs. 5 per unit of output when he…

A: A producer faces a fixed cost = Rs. 50 Variable cost = Rs. 5 per unit of output. Total cost= fixed…

Q: If marginal revenue is positive, this means selling one more unit of output will increase total…

A: Marginal Revenue refers that the revenue earned from the additional unit sold or one or more unit…

Q: I. Assumptions. Please underline the right answer. There are (few/many) buyers and sellers. The…

A: A perfect competition is on one finish of the market structure vary. during this context, the word…

Q: The Finger Lakes region in New York State produces wine. The climate favors white wines, but reds…

A: Answer(h) Fixed Cost.

Q: Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently…

A: Given, Quantity of polyol sold per year = $30,000 Price per gallon…

Q: A store can sell 12 telephone answering machines per day at a price of $200 each.. The manager…

A: Sales at price of $200 = 12 Sales at price of $190 = 14 For every $10 price reduction, number of…

Q: A business firm produces and sells a particular Variable cost is P30/unit. Selling price is P40 per…

A: Given informations: Variable cost = P30 per unit Selling price = P40 Fixed cost = P60000

Q: Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently…

A: a) Achieve a 15 percent increase in the quantity sold Following is the formula of elasticity of…

Q: If clients in an industry have homogeneous price-quality choices, a company with higher than average…

A: Answer: An industry with homogeneous price and quality is called perfectly competitive industry. The…

Q: A firm faces the following average revenue (demand) curve: P = 100 - 0.01Q where Q is weekly…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Q5 Which of the following characteristics is NOT typically associated with imperfectly competitive…

A: A competitive market is a place where many manufacturers compete with each other in the hope of…

Question

For many, the principle “marginal revenue equal marginal cost" condition for profit maximization is rather confusing.
Discuss the rationale behind the condition, highlighting how different it is from the break-even analysis.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

marginal revenue equal marginal cost" condition for profit maximization is rather confusing.Discuss the rationale behind the condition, highlighting how different it is from the break-even analysis.
Recall that profit equals revenue minus cost. For the revenue and cost functions shown, answer parts (a) through (e) below. R(x)equals=400x−2x^2 and C(x)equals=200x+4250, with 0≤x≤100 (a) Find the break-even point. The break-even point(s) is(are) x=?. (Type an integer or decimal rounded to one decimal place as needed. Use a comma to separate answers as needed.) (b) Find the x-value that makes profit a maximum. x=? (Type an integer or decimal rounded to one decimal place as needed.) (c) Find the maximum profit. The maximum profit is $? (Type an integer or decimal rounded to one decimal place as needed.) (d) For what x-values will a loss occur? Select the correct choice below and fill in the answer box(es) to complete your choice. (Round to one decimal place as needed.) A. x<? or x>? B. x>? C. x<? D. ?<x<? (e) For what x-values will a profit occur? Select the correct choice below…
How many of the following will occur with a linear total revenue curve? (i) A linear cost curve (ii) A linear profit curve (iii) A single break-even point (iv) Increasing profits as output increases beyond the upper break-even point a.None b.Four c.Three d.One e.Two
Distinguish clearly between Marginal Revenue and Marginal Costs using suitable examples.
Dalahla Company Limited, focusing on producing tooth paste (in units) has a demand function4? = 35 − 0.5?. If total fixed cost is GH¢80 and average variable cost per unit function is 3? −51+325/Q, where Q is number of tooth paste produced and P is the price per tooth paste (in GH¢).What is the total profit at the profit maximizing level of output, and what is the best pricing policyoption?
Cells A1 to A3 contain the quantity produced for the three products. Whereas cells B1 to B3 and C1 to C3 contain profit/unit and production time required per unit respectively for the same three products. What is the content of the Set Objective cell for maximising Total Profit? a. =SUMPRODUCTS (A1:A3, B1:B3) b. None of these c. =SUM(A1:A3) d. =SUMPRODUCTS (A1:A3, C1:C3)
At the profit-maximizing output level, the slopes of the revenue and total cost curves are not equal, that is; MR(*) < MC(*).Select one: True False
When economists talk about a barrier to entry, they are referring to a.the downward-sloping portion of the long-run average total cost curve. b.a factor that makes it difficult for potential competitors to enter a market. c.the opportunity cost of equity capital that is incurred by a firm producing at minimum total cost. d.the declining output experienced as additional units of a variable input are used with a given amount of a fixed input.
19. Given the total revenue and the total cost function in # 18, the corresponding marginal revenue is computed as MR = 78 – 4Q, while the marginal cost is MC = 2, find the optimal level of output that maximizes profits where MR = MC A. Q = 18 B. Q = 19 C. Q = 20 D. Q = 21 E. No correct answer
In a perfectly competitive market, one of the following answers is correct with respect to the demand curve for a perfectly competitive firm. Which one? Group of answer choices The perceived demand curve is downward sloping. The perceived demand curve for a perfectly competitive firm and a monopolist look the same. When price increases, quantity demanded from the firm will also decrease. The demand curve is flat. Answer correct and explain within 40 mins will give you positive feedback.
Industries can be classified by a. cost structure b. degree of vertical integration c. entry and exit barriers d. all of the above
Q: Find the Marginal Revenue and Marginal Cost functions from the following equations 1. TR= Q3 – 6Q2 + 140Q + 750 2. TC= 35 + 5Q -2Q2 +2Q3