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#cfa-level-1 #economics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit
Aproach:
  • the revenue value of the output from the last unit of input employed equals the cost of employing that input unit

This method compares the estimated cost of each unit of input to that input’s contribution with projected total revenue.

If the increase in projected total revenue coming from the input unit exceeds its cost, it contributes to total profit.

If the increase in projected total revenue does not cover the input unit’s cost, total profit is diminished.

Profit maximization based on the employment of inputs occurs where the next input unit for each type of resource used no longer makes any contribution to total profit.
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3.1.4. Output Optimization and Maximization of Profit
ore 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. <span>The third method compares the estimated cost of each unit of input to that input’s contribution with projected total revenue. If the increase in projected total revenue coming from the input unit exceeds its cost, a contribution to total profit is evident. In turn, this justifies further employment of that input. On the other hand, if the increase in projected total revenue does not cover the input unit’s cost, total profit is diminished. Profit maximization based on the employment of inputs occurs where the next input unit for each type of resource used no longer makes any contribution to total profit. <span><body><html>


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