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In microeconomics, marginal profit is the increment to profit resulting from a unit or infinitesimal increment to the quantity of a product produced. Under the marginal approach to profit maximization, to maximize profits, a firm should continue to produce a good or service up to the point where marginal profit is zero. At any lesser quantity ...
The quantity, (), is of interest in its own right, and is called the Unit Contribution Margin (C): it is the marginal profit per unit, or alternatively the portion of each sale that contributes to Fixed Costs. Thus the break-even point can be more simply computed as the point where Total Contribution = Total Fixed Cost:
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If the marginal revenue is greater than the marginal cost (>), then its total profit is not maximized, because the firm can produce additional units to earn additional profit. In other words, in this case, it is in the "rational" interest of the firm to increase its output level until its total profit is maximized.
Similarly, if the third kilogram of seeds yields only a quarter ton, then the marginal cost equals per quarter ton or per ton, and the average cost is per 7/4 tons, or /7 per ton of output. Thus, diminishing marginal returns imply increasing marginal costs and increasing average costs. Cost is measured in terms of opportunity cost. In this case ...
The marginal profit per unit of labor equals the marginal revenue product of labor minus the marginal cost of labor or M π L = MRP L − MC L A firm maximizes profits where M π L = 0. The marginal revenue product is the change in total revenue per unit change in the variable input assume labor. [10] That is, MRP L = ∆TR/∆L.
Editor's note: Annual percentage yields shown are as of Friday, December 13, 2024, at 8:10 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change. Sources.
The profit for each firm would be determined by multiplying their output by the per unit market price. Differentiating the profit function with respect to quantity supplied for each firm left a system of linear equations, the simultaneous solution of which gave the equilibrium quantity, price and profits. [22]