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In economics and finance, marginal cost is the change in total cost that arises when the quantity produced changes by one unit

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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.


What is the difference between marginal benefits and marginal costs?

The term marginal cost refers to the oppurtunity cost associated with producing one more additional unit of a good. Opportunity cost is a critical concept to economics - it refers to the value of the highest value alternative opportunity. For example, in examining the marginal cost of producing one more bushel of wheat, that number could be expressed as the dollar value of corn or other goods that could be produced in lieu of more wheat. Marginal benefit refers to what people are willing to give up in order to obtain one more unit of a good, while marginal cost refers to the value of what is given up in order to produce that additional unit. Additional units of a good should be produced as long as marginal benefit exceeds marginal cost. It would be inefficient to produce goods when the marginal benefit is less than the marginal cost. Therefore an efficient level of product is achieved when marginal benefit is equal to marginal cost.


What is the profit of maximization?

Profit maximization is the process by which a business seeks to achieve the highest possible profit from its operations. This involves optimizing the balance between revenues and costs, often through strategies such as increasing sales, reducing expenses, or improving operational efficiency. The ultimate goal is to identify the level of output where marginal costs equal marginal revenue, thus maximizing the difference between total revenue and total costs. In essence, profit maximization helps businesses make informed decisions that drive financial success.


Definition profit maximization?

Profit maximization is the process by which a firm determines the price and output level that leads to the highest possible profit. This typically involves analyzing costs, revenues, and market conditions to identify the optimal production level where marginal cost equals marginal revenue. Firms aim to allocate resources efficiently to achieve this goal, balancing the trade-offs between production costs and potential sales revenue. Ultimately, profit maximization is a fundamental objective in business strategy and economic theory.


How does the relationship between marginal cost and marginal benefit impact producers?

It helps producers decide how much of a good to make.

Related Questions

Are marginal costs relevant costs?

If marginal costs are relevant for specific situation or specific decision making scenario then marginal costs are relevant costs otherwise marginal costs can be irrelevant.


Where could one learn about marginal costs?

One is able to learn about marginal costs at several different places online, such as at the following websites: the Wikipedia Marginal Costs webpage, Marginal Cost, and Margins.


Profits will be maximized when marginal revenue?

Profits will be maximized when marginal revenue is equal to marginal costs. This will only happen in cases where there are fixed costs.


Rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs?

Rational Decision making occurs when marginal benefits of an action exceed the marginal costs


A producers profits are maximized when marginal costs are .?

equal to marginal revenue


A producers profits are maximized when marginal costs are?

equal to marginal revenue


If you have Marginal Cost and Marginal Damages how do you find the optimal level of output?

The optimal level of output is where marginal costs = marginal damages.


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.


What Economists say that choices involves comparing?

Marginal benefits and marginal costs


Where will A profit maximizing firm produce?

Where the marginal benefits equal marginal costs.


A company is maximizing profit when marginal revenue?

A company maximizes profits when marginal revenue equals marginal costs.


When marginal costs are below average cost at a given output one can deduce that if output increases what happens?

when marginal costs are below average cost at a given output, one candeduce that, if output increases dose average costs fall or marginal costs will fall