The addition to total costs from producing and selling one more unit
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Marginal Revenue
The addition to total revenue from producing and selling one more unit
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What happens if we produce before the profit maximisation point?
MR > MC so producing and selling extra units is profitable as you move closer to the PM point MR is falling and MC is rising. You are making less and less on each unit but it is still worth producing as you are adding to total profit
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What happens if we produce after the profit maximisation point?
MC>MR, so it costs you more to make the product than to sell it, therefore you would make a loss from that unit which will lower overall profit
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Golden Rule for Profit Maximisation
Produce where MC=MR, when MC is rising
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Other cards in this set
Card 2
Front
The addition to total revenue from producing and selling one more unit
Back
Marginal Revenue
Card 3
Front
MR > MC so producing and selling extra units is profitable as you move closer to the PM point MR is falling and MC is rising. You are making less and less on each unit but it is still worth producing as you are adding to total profit
Back
Card 4
Front
MC>MR, so it costs you more to make the product than to sell it, therefore you would make a loss from that unit which will lower overall profit
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