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The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because if?
Wiki User
∙ 8y ago
Marginal revenue and marginal cost are equal, any other output level will result in reduced profit.
Wiki User
∙ 8y ago
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What is the golden rule of profit maximization?
To maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures
Necessary and sufficient condition for profit maximization?
Marginal Revenue = Marginal Cost
Why is the equality of marginal revenue to marginal cost essential to profit maximuzation in all of the market structures?
When Marginal Cost is below Marginal Revenue, profit is increasing. When Marginal Cost is above Marginal Revenue, profit is decreasing. Since the goal of firms is to maximise profit, they should produce at a level where the MR of producing another unit is equal to the Marginal Cost of producing another unit. Firms should keep producing until this point because there is a hidden profit in MC. This is because we are not taking into account the Accounting profit.
Discuss the proposition that pareto optimality is a necessarybut not a sufficient condition for social welfare maximization?
three marginal conditions for welfare maximization
Why is marginal analysis involved in economics?
Economic theory makes much use of marginal concepts. Marginal cost, marginal revenue, marginal rate of substitution, marginal utility, marginal product, and marginal propensity to consume are a few examples. Marginal means on the margin and refers to what happens with a small change from the present position. It is the concept of economic choices to make small changes rather than large-scale adjustments. Marginal analysis is the key principle of profit-maximization in firms and utility maximization among consumers.
What is the golden rule of profit maximization?
To maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures
Necessary and sufficient condition for profit maximization?
Marginal Revenue = Marginal Cost
Why is the equality of marginal revenue to marginal cost essential to profit maximuzation in all of the market structures?
When Marginal Cost is below Marginal Revenue, profit is increasing. When Marginal Cost is above Marginal Revenue, profit is decreasing. Since the goal of firms is to maximise profit, they should produce at a level where the MR of producing another unit is equal to the Marginal Cost of producing another unit. Firms should keep producing until this point because there is a hidden profit in MC. This is because we are not taking into account the Accounting profit.
Discuss the proposition that pareto optimality is a necessarybut not a sufficient condition for social welfare maximization?
three marginal conditions for welfare maximization
Why is marginal analysis involved in economics?
Economic theory makes much use of marginal concepts. Marginal cost, marginal revenue, marginal rate of substitution, marginal utility, marginal product, and marginal propensity to consume are a few examples. Marginal means on the margin and refers to what happens with a small change from the present position. It is the concept of economic choices to make small changes rather than large-scale adjustments. Marginal analysis is the key principle of profit-maximization in firms and utility maximization among consumers.
What is marginal private costs?
The marginal private cost shows the cost associated to the firm in question. It is the marginal private cost that is used by business decision makers in their profit maximization goals, and by individuals in their purchasing and consumption choices.
Discuss the profit maximization model?
hard to discuss. To really explain it I'd need a graph which I don't have. But Profit maximization is the ATC (Average total cost) and MR (Marginal Revenue) equal each other
What is private cost?
The marginal private cost shows the cost associated to the firm in question. It is the marginal private cost that is used by business decision makers in their profit maximization goals, and by individuals in their purchasing and consumption choices.
Profit maxiamisation in a perfect economy?
Profit maximization occurs when the firm produces /sets their price at the intersection of the marginal cost curve and the horizontal MR DARP curve (marginal revenue, demand, average revenue, price)
Saying the marginal costs are greater than the marginal benefits is the same as saying?
Marginal costs and marginal benefits are discussing the conditions for profit maximization. This statement can only have further explanation if it is clarified under circumstantial economic conditions. One of the conditions is that the firm is not a monopoly and that there is competition that keeps the price of the good at a single price. Another condition is that there are diminishing returns to labor and production. This means that resources are scarce for production so it becomes more costly to produce more because there are more constraints to resources and there is a limited labor skill pool. In a competitive market the wage is also assumed to be equal for everyone who is employed to do the same job. Thus, if the marginal costs are greater than the marginal benefits then the profit maximizing equation for a firm or individual is not in balance. The profit maximizing condition for a firm or individual is marginal costs equal marginal benefits. For example in the context of a firm, the marginal costs of producing is the wage it must pay to each extra worker it hires and the benefits are the goods that the worker produces for the firm to sell. Assuming that all workers are given the same wage, the firm should hire as many workers until the marginal revenue the worker produces (Marginal product*price) is equal to the wage. This implies price important because price determines how much revenue the worker makes from the product. If the firm is producing where marginal cost is above marginal benefit the firm is losing money and should get rid of some workers. If the firm has control over the price, like in a monopoly, then the profit maximization condition is a little different. In the case of a monopoly the demand curve is not the same as the marginal revenue curve. This is because in a monopoly the firm has to decrease price in order to sell more of the good because they are the only supplier. Marginal revenue is derived from the demand but the profit maximization condition is still marginal cost equals marginal benefits but marginal benefits does not equal the demand curve.
What is the health benefit of using Cayenne papper?
It is certainly not essential for good health. It may have some marginal impact but not using it would not be detrimental
What is the equation for marginal net benefits?
Marginal net benefits= Marginal benefit- Marginal cost
