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variable costs and fixed costs

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Analyzes how companies can employ the marginal revenue concept and the marginal cost concept to maximize profits using 350 words.

To use the concept, variable costs and fixed costs will have to be incorporated into and used with the marginal cost concept. How might competition lessen the possibility of use the marginal concepts to maximize profits?

DEFINITIONS OF MC, MR

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Solution Summary

An overview of variable costs and fixed costs with discussion of its relevance in monopoly and competition.

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The marginal cost (MC) is the cost of an additional unit of production. So, the marginal cost of the 10th stereo is the cost of producing that 10th stereo, or the total cost of producing all 10 stereos, minus the cost of producing 9 stereos. Another way of putting it is that the MC is the total variable costs (TVC) of producing 10 stereos minus the total variable cost of producing 9 stereos. This is because neither the MC nor the TVC include Fixed Costs. Fixed costs are not unit dependent, and MC and TVC are.

Marginal revenue is the additional revenue that you would gain from ...

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