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What happens when marginal revenue equals marginal cost?
profit is maximized
What happens when the slope of the total revenue curve is equal to the slope of the total cost curve?
a. monopoly profit is maximized. b. marginal revenue equals marginal cost. c. the marginal cost curve intersects the total average cost curve. d. the total cost curve is at its minimum. e. Both A and B
Marginal revenue equals?
marginal cost of production
When marginal revenue equals marginal cost?
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
What happens when marginal revenue equals marginal cost?
profit is maximized
What happens when the slope of the total revenue curve is equal to the slope of the total cost curve?
a. monopoly profit is maximized. b. marginal revenue equals marginal cost. c. the marginal cost curve intersects the total average cost curve. d. the total cost curve is at its minimum. e. Both A and B
Marginal revenue equals?
marginal cost of production
When marginal revenue equals marginal cost?
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
Why do the demand and marginal revenue curves coincide?
Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.
A company is maximizing profit when marginal revenue?
A company maximizes profits when marginal revenue equals marginal costs.
What are the relationship between marginal cost and average total cost schedule?
Marginal cost is the cost incurred in producing an additional unit of a product. It is the cost per unit of a product as against the total cost. It is therefore the variable cost of producing one more unit of a product.Average total cost is the total cost of production at an activity level. it is the total cost of divided by the total production.Whiles marginal cost shows the cost incurred in producing an additional unit of a product, average cost shows the total cost of production per unit.Just a small addition to this thought:Think of the marginal cost as being at a point in time, whereas the average total cost is calculated over a period of time. As a result, marginal cost at any given point may be higher or lower than an average total cost.Quick example:ABC manufactures a product they call Widget AWidget A sells for a price of $20ABC sells 1,000 units of Widget AFixed costs for this production run are $5,000, regardless of # of units soldVariable costs are $12 per unitGross Revenues $20,000Fixed Cost Expense $ 5,000Variable Cost Expense $12,000Gross Profit $ 3,000Breakeven # of units can be calculated as follows:20x = 5000 + 12x. Solving for x gives 625 units to break even. At this point the Average Transaction Cost equals the selling price of $20 per unit. As each additional unit is produced the ATC will decrease since the only additional cost is the variable cost of $12 per unit. Therefore, in this very simple example, the MARGINAL COST of producing each unit OVER 625 would be the $12 variable cost expense. In the example above, at 1,000 units the Average Transaction Cost is $17 ($5 per unit for Fixed and $12 per unit for Variable), which is a decrease from the $20 ATC at break even.
In a short run if the variable cost equals 50 average total equals 75 and output equals 100 the total fixed cost must be?
The answer is 25.
How do you achieve allocative efficiency?
Allocative efficiency is an output level where the price equals the marginal cost of production. This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get. Therefore the optimal distribution is achieved when the marginal utility of the good equals the marginal cost.
How can marginal revenew and marginal costs help set the most profitable putput level?
The most profitable output level is when marginal costs equals marginal revenue. When marginal revenue is larger than marginal cost, that means that more product can be produced for more profit.
When p equals ar equals mr equals ac equals mc?
When price (p), average revenue (ar), marginal revenue (mr), average cost (ac), and marginal cost (mc) are equal, a firm is in a state of long-run equilibrium in perfect competition. In this scenario, the firm earns normal profits, as total revenue equals total cost, and there is no incentive for firms to enter or exit the market. This equality indicates that firms are maximizing their profits while producing at the most efficient scale. Consequently, resources are allocated efficiently in the market.
Why are profit maximize when marginal revenue is equal to marginal cost?
Profits are maximized when marginal costs equals marginal revenue because fixed costs are now spread over a larger amount of revenue. This means that total cost per unit declines and profits increase. Another way to say this is that this is the effect of scale. When marginal revenue equals marginal costs, in a growing revenue situation, you gain economies of scale and higher profits.
