#cfa-level-1 #economics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit
Aproach:
- marginal revenue (MR) equals marginal cost (MC);
When using the marginal revenue–marginal cost approach, the firm compares the change in predicted total revenue (MR) with the change in predicted total costs (
MC) by unit of output. If
MR exceeds
MC, total profit is increased by producing more units because each successive unit adds more to total revenue than it does to total costs. If
MC is greater than
MR, total profit is decreased when additional units are produced. The point of profit maximization occurs where
MR equals
MC.