Marginal Profit
Marginal profit is the change in total profit resulting from a one-unit increase in the quantity produced (Q). It is calculated as the difference between marginal revenue (MR), which is the change in revenue from the additional unit, and marginal cost (MC), which is the change in cost from producing that additional unit. The relationship is expressed by the formula:
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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The Downward-Sloping Nature of the Marginal Revenue Curve
Beautiful Cars' Profit Maximization at Point E (Q*=32, P*=$27,200, Profit=$329,600)
Expressing Profit as a Function of Quantity (Q) Using the Substitution Method
Figure 7.4b: Cheerios Profit Function Graph (Profit-Quantity Diagram)
Profit Maximization at the Intersection of Marginal Revenue and Marginal Cost Curves
Artisanal Bakery's Optimal Output Decision
A company that produces handcrafted chairs has the following demand and total cost information. To maximize its profit, how many chairs should the company produce?
Quantity (Q) Price per Chair (P) Total Cost (TC) 10 $90 $700 20 $80 $1250 30 $70 $1850 40 $60 $2500 The graph below represents a company's total profit as a function of the quantity of units it produces and sells. The vertical axis measures profit in dollars, and the horizontal axis measures the quantity of units. The profit curve starts at a negative value, increases to a single peak at a quantity of 500 units where profit is $10,000, and then decreases, crossing into negative profit (a loss) at a quantity of 900 units. Based on this graph, which of the following decisions should the company make to achieve its primary goal?
A company facing a downward-sloping demand curve for its product will always maximize its profit by producing and selling the largest possible quantity for which the price per unit is still greater than the average cost per unit.
Profit Analysis for a Custom T-Shirt Business
A firm wants to find the quantity of output that will maximize its profit. The firm knows its total cost for producing any given quantity and has access to the market demand schedule, which shows the price it can charge for any quantity it wishes to sell. Arrange the following steps in the correct logical order to determine the profit-maximizing quantity.
A company's profit (π), in dollars, from producing and selling a certain good is given by the function π(Q) = -2Q² + 160Q - 2000, where Q is the quantity of goods sold. The company's production capacity is 100 units. To maximize its profit, how many units should the company produce and sell?
Critique of a Revenue Maximization Strategy
A local artisan sells custom-made wooden bowls. The table below shows the price the artisan can charge for different quantities and the total cost of producing those quantities. Calculate the total profit for each quantity level and match it to the correct quantity.
Quantity (Q) Price per Bowl (P) Total Cost (TC) 5 $50 $150 10 $45 $250 15 $40 $375 20 $35 $550 A company that manufactures custom phone cases is currently producing and selling 20 cases per day. The company is considering increasing its daily production to 30 cases. Using the demand and cost information provided in the table below, determine the effect this change in output would have on the company's daily profit.
Quantity (Q) Price per Case (P) Total Cost (TC) 10 $25 $180 20 $22 $280 30 $19 $350 40 $16 $450 Profit as Revenue Minus Total Cost
Figure 7.17: Profit Maximization for Beautiful Cars using Marginal Revenue and Marginal Cost Curves
Marginal Profit
Algebraic Derivation of the Marginal Revenue Formula
A company sells a product and faces an inverse demand function of P = 120 - 2Q, where P is the price per unit and Q is the quantity of units sold. What is the additional revenue generated by increasing sales from 20 units to 21 units?
Interpreting Changes in Total Revenue
Evaluating a Pricing Strategy
A firm observes that its total revenue is maximized when it sells 500 units of its product. What can be concluded about the marginal revenue for the 500th unit sold?
A company observes that after lowering the price of its product, its total revenue increased. Based on this information, it is correct to conclude that the marginal revenue associated with the additional units sold was negative.
Calculating Marginal Revenue from a Demand Schedule
A company finds that to sell a greater quantity of its product, it must lower the price for every unit it sells. Given this situation, which statement correctly compares the price of the product to the additional revenue gained from selling one more unit?
Deriving the Marginal Revenue Function
A firm faces the demand schedule provided below. Match each change in quantity sold with the corresponding marginal revenue generated by that change.
Demand Schedule:
Quantity (Q) Price (P) 0 $10 1 $9 2 $8 3 $7 4 $6 The Relationship Between Price and Marginal Revenue
Monopoly Profit Maximization
Marginal Profit
Small Business Profit Calculation
A company manufactures and sells 200 units of a product at a price of $50 per unit. The total cost to produce these 200 units is $7,000. What is the company's total profit?
Evaluating Production Strategies
A company sells 1,000 widgets at a price of $15 per widget. The total cost to produce these widgets is $12,500. Based on this information, the company's total profit is $2,500.
Profit Calculation with Demand and Cost Functions
Match each economic term with its correct description in the context of a firm's finances.
A company manufactures and sells 800 units of a product. The selling price for each unit is $60, and the average cost to produce each unit is $35. The company's total profit is $____.
Strategic Decision-Making and Profitability
A firm wants to determine its total profit. Arrange the following steps in the logical order required to calculate the final profit figure, starting from the most fundamental pieces of information.
A manufacturing firm produces 500 units of a product. The selling price is $40 per unit, the variable cost is $15 per unit, and the total fixed costs are $5,000. What is the firm's total profit?
Marginal Profit
Estimating Marginal Cost
Decreasing Marginal Cost
Marginal Cost as the Derivative of the Total Cost Function
A firm's total cost to produce a quantity (Q) of a good is given by the function C(Q) = 100 + 5Q + 2Q². What is the marginal cost of production when the firm is producing 10 units?
Analyzing Production Costs
A firm's total cost (TC) of production changes as the quantity (Q) of output changes. The marginal cost (MC) represents the slope, or rate of change, of the total cost curve. Below are descriptions of four different total cost curves. Match each total cost curve to the description of the marginal cost curve it implies.
Marginal vs. Average Cost Decision-Making
A company observes that its total cost to produce 10 widgets is $500. When it increases production to 11 widgets, its total cost rises to $540. Based on this information, the marginal cost of producing the 11th widget is equal to the average total cost of producing 11 widgets.
Relationship Between Total Cost and Marginal Cost
A company's total cost to produce 200 units of a product is $5,000. When it increases production to 201 units, its total cost rises to $5,025. Based on this information, the marginal cost of producing the 201st unit is $____.
A firm's production schedule shows the total cost associated with different levels of output. Based on the data provided in the table below, arrange the following production intervals in ascending order (from lowest to highest) of their marginal cost.
Quantity (Q) Total Cost (TC) 0 $100 10 $200 20 $400 30 $700 40 $1100 A company manufactures widgets and sells them for a constant price of $15 each. The company is currently producing 1,000 widgets per week. At this level of production, the firm calculates that the additional cost to produce one more widget (the 1,001st) would be $12. Assuming the company's goal is to maximize its profit, what is the most logical immediate action for the firm to take based only on this information?
The graph of a firm's total cost (TC) as a function of output quantity (Q) is shown. A tangent line drawn to the curve at an output level of Q1 is visibly less steep than a tangent line drawn to the curve at a higher output level of Q2. Based on this graphical information, what can be concluded about the firm's marginal cost (MC) at these two points?
A company's total cost (C) to produce a quantity (Q) of a product is described by the function C(Q) = 200 + 10Q + 0.25Q². What is the additional cost the company will incur to produce the 21st unit?
Analyzing Cost Behavior
Analyzing the Shape of Cost Curves
Consider a firm's total cost curve plotted on a graph, with total cost on the vertical axis and quantity of output on the horizontal axis. The curve starts at a positive cost value on the vertical axis, initially rises at a decreasing rate (becoming flatter), and then begins to rise at an increasing rate (becoming steeper). This creates a curve with a distinct inflection point. At which point on this curve would the firm's marginal cost be at its minimum?
Production Decision Analysis
A manufacturing firm observes that for every additional unit it produces, the cost to produce that specific unit remains constant. Which of the following statements best describes the firm's total cost curve when plotted with cost on the vertical axis and quantity on the horizontal axis?
A firm is currently producing at a level of output where the cost of producing one more unit is greater than the average total cost per unit. If this firm decides to increase its production by one unit, what will be the effect on its average total cost?
A firm's total cost (C) of producing a quantity of output (Q) can be represented by a mathematical function. The shape of this function determines the behavior of the additional cost incurred for each new unit produced. Match each total cost function below with the description of its corresponding marginal cost behavior.
If a firm's total cost of production is increasing as it produces more output, its marginal cost must also be increasing.
Analyzing Marginal Cost Behavior from a Total Cost Function
Monopoly Profit Maximization
Increasing Marginal Cost in the Short Run
Short Run
Marginal Profit
Learn After
Firm's Output Decision Based on Marginal Profit
A company that produces widgets is currently making 100 widgets per day. At this level of production, its total daily revenue is $5,000 and its total daily cost is $3,500. If the company decides to produce 101 widgets tomorrow, its total daily revenue would be $5,045 and its total daily cost would be $3,530. Based on this information, what is the specific change in the company's total profit that would result from producing the 101st widget?
Production Decision Analysis
Profit Analysis for a Small Bakery
A firm is considering increasing its production by one unit. If the additional revenue generated from selling this unit is exactly equal to the additional cost of producing it, the firm's total profit will increase.
Analyzing Components of Marginal Profit
A firm is analyzing the effect of producing and selling one more unit of its product. Match each potential scenario with its direct impact on the firm's total profit.
Evaluating a Profit Strategy
When the revenue gained from selling one additional unit of a product is $50 and the cost to produce that same unit is $35, the change in total profit from producing and selling that unit, also known as the __________, is $15.
A firm is currently producing 1,000 units of a product and is operating at a total economic loss. At this level of output, the revenue gained from selling one additional unit is $50, while the cost incurred to produce that one additional unit is $40. Based on this information, what is the most logical step for the firm to take to move towards its profit-maximizing level of output?
A firm is analyzing its production levels to maximize profit. The table below shows the marginal revenue (MR) and marginal cost (MC) for each additional unit of its product.
Quantity Marginal Revenue (MR) Marginal Cost (MC) 1 $20 $10 2 $20 $12 3 $20 $15 4 $20 $20 5 $20 $25 Based on this data, what is the profit-maximizing quantity of output for the firm?