If MR is greater than MC, the firm should increase their production. The ideal amount of production is determined by allowing the marginal cost to equal the marginal revenue.
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
To increase profit the firm will decrease output to a point where MC=MR. This is the Profit Maximisation point
An oligopolist maximizes profit by producing at the output level where marginal cost (MC) equals marginal revenue (MR). This typically occurs where the firm's marginal revenue curve intersects its marginal cost curve. Given the interdependence among firms in an oligopoly, this output decision also considers the reactions of competing firms, leading to strategic pricing and production choices. As a result, the oligopolist may produce less than the socially optimal output level, which can lead to higher prices for consumers.
Marginal cost is the extra cost incurred in producing one unit of a product.If the marginal cost is more than average cost that means that costs are increasing and if it is less it means costs are decreasing.This way we find out how are business is progressing.
Marginal cost = derivative of (Total cost/Quantity) Where Total cost = fixed cost + variable cost Marginal cost = derivative (Variable cost/Quantity) (by definition, fixed costs do not vary with quantity produced) Average cost = Total cost/Quantity The rate of change of average cost is equivalent to its derivative. Thus, AC' = derivative(Total cost/Quantity) => derivative (Variable cost/Quantity) = MC. So, when MC is increasing, AC' is increasing. That is, when marginal cost increases, the rate of change of average cost must increase, so average cost is always increasing when marginal cost is increasing.
If a firm's marginal revenue is greater than its marginal cost, it should increase production to maximize profits.
To determine the marginal revenue from marginal cost in a business setting, one can calculate the change in revenue from selling one additional unit of a product and compare it to the change in cost from producing that additional unit. If the marginal revenue is greater than the marginal cost, it is profitable to produce more units.
increase output
Marginal Cost = Marginal Revenue, or the derivative of the Total Revenue, which is price x quantity.
The relationship between marginal cost and marginal revenue in determining optimal production levels is that a company should produce at a level where marginal cost equals marginal revenue. This is because at this point, the company maximizes its profits by balancing the additional cost of producing one more unit with the additional revenue generated from selling that unit.
The relationship between marginal revenue and marginal cost in determining the optimal level of production for a firm is that the firm should produce at a level where marginal revenue equals marginal cost. This is because at this point, the firm maximizes its profits by balancing the additional revenue gained from producing one more unit with the additional cost of producing that unit.
A monopolist will set production at a level where marginal cost is equal to marginal revenue.
marginal cost of production
Profit=Total revenue - Total cost
price = marginal revenue. marginal revenue > average revenue. price > marginal cost. total revenue > marginal co
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.
profit is maximized