EGT1 Task 2: Questions And Answers

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EGT1 TASK 1 McConnell, Brue and Flynn define Marginal Revenue as “the change in total revenue that results from the sale of one additional unit of a firm’s product; equal to the change in total revenue divided by the change in the quantity of the product sold.” (McConnell, Brue and Flynn, 2012). When we look at the relationship between total revenue and marginal revenue we can see that it is purely a mathematical relationship. The formula that is used to determine Total Revenue is the following; Total Revenue = Price X Quantity, (TR = P X Q). McConnell, Brue and Flynn also define Marginal Cost they state that it is “the extra cost of producing one more unit of output; equal to the change in total cost divided by the change in output.” (McConnell, Brue and Flynn 2011). The marginal cost and total cost is directly related to each other. This is because marginal cost is the change in the cost of producing one unit of output. Total cost is the sum of the fixed cost and the variable cost, marginal cost affects the variable cost of producing the product this in turn changes the total cost of producing the product. Thus varying the marginal cost impacts the total economic cost to produce the product.…show more content…
I am the sole owner of a small bathtub resurfacing business that is not performing very well. One of the lessons I am learning is if a business is not making a profit it will cease to operate, it will go bankrupt and I would be force to close it down. For my business to be successful and remain open I have to maximize my
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