Examples of marginal cost in the following topics:
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- Marginal cost includes all of the costs that vary with the level of production.
- Marginal cost is not related to fixed costs.
- When the average cost declines, the marginal cost is less than the average cost.
- When the average cost increases, the marginal cost is greater than the average cost.
- This graph is a cost curve that shows the average total cost, marginal cost, and marginal revenue.
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- In order to maximize profit, the firm should set marginal revenue (MR) equal to the marginal cost (MC).
- Marginal cost is the change in total cost divided by the change in output.
- An example of marginal cost is evident when the cost of making one pair of shoes is $30.
- Firms will produce up until the point that marginal cost equals marginal revenue.
- This graph shows a typical marginal cost (MC) curve with marginal revenue (MR) overlaid.
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- The marginal cost of capital is the cost needed to raise the last dollar of capital, and usually this amount increases with total capital.
- The marginal cost of capital is calculated as being the cost of the last dollar of capital raised.
- Generally we see that as more capital is raised, the marginal cost of capital rises .
- This happens due to the fact that marginal cost of capital generally is the weighted average of the cost of raising the last dollar of capital.
- The Marginal Cost of Capital is the cost of the last dollar of capital raised.
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- For monopolies, marginal cost curves are upward sloping and marginal revenues are downward sloping.
- Marginal costs get higher as output increases.
- Production occurs where marginal cost and marginal revenue intersect.
- Production occurs where marginal cost and marginal revenue intersect.
- Analyze how marginal and marginal costs affect a company's production decision
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- The total revenue-total cost perspective and the marginal revenue-marginal cost perspective are used to find profit maximizing quantities.
- The various types of cost curves include total, average, marginal curves.
- There are two ways in which cost curves can be used to find profit maximizing quantities: the total revenue-total cost perspective and the marginal revenue-marginal cost perspective.
- The marginal revenue-marginal cost perspective relies on the understanding that for each unit sold, the marginal profit equals the marginal revenue (MR) minus the marginal cost (MC).
- If the marginal revenue is greater than the marginal cost, then the marginal profit is positive and a greater quantity of the good should be produced.
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- To maximize output, monopolies produce the quantity at which marginal supply is equal to marginal cost.
- If we assume increasing marginal costs and exogenous input prices, the optimal decision for all firms is to equate the marginal cost and marginal revenue of production.
- Because of this, rather than finding the point where the marginal cost curve intersects a horizontal marginal revenue curve (which is equivalent to good's price), we must find the point where the marginal cost curve intersect a downward-sloping marginal revenue curve.
- Like non-monopolies, monopolists will produce the at the quantity such that marginal revenue (MR) equals marginal cost (MC).
- Calculate and graph the firm's marginal revenue, marginal cost, and demand curves
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- The government is providing an efficient quantity of a public good when its marginal benefit equals its marginal cost.
- The supply curve for a public good is equal to its marginal cost curve.
- The public good provider uses cost-benefit analysis to decide whether to provide a particular good by comparing marginal costs and marginal benefits.
- Output activity should be increased as long as the marginal benefit exceeds the marginal cost.
- An activity should not be pursued when the marginal benefit is less than the marginal cost.
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- The cost or benefit of the single decision is called the marginal cost or the marginal benefit.
- In theory, individuals will only choose an option if marginal benefit exceeds marginal cost.
- The prices represent the marginal costs of each car; purchasing the car will add the cost of the car to your total costs.
- The tools of marginal analysis can illustrate the marginal costs and the marginal benefits of reducing pollution.
- At point $Q_c$, the marginal costs will exceed the marginal benefits.
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- Pricing decisions tend to heavily involve analysis regarding marginal contributions to revenues and costs.
- In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output is known as marginal-cost pricing.
- Businesses often set prices close to marginal cost during periods of poor sales.
- Alternatively, if marginal revenue is less than the marginal cost, marginal profit is negative and a lesser quantity should be produced.
- At the output level at which marginal revenue equals marginal cost, marginal profit is zero and this quantity is the one that maximizes profit.
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- Profit margin is one of the most used profitability ratios.
- Recall that gross profit is simply the revenue minus the cost of goods sold (COGS).
- The gross profit margin calculation uses gross profit and the net profit margin calculation uses net profit .
- Companies need to have a positive profit margin in order to earn income, although having a negative profit margin may be advantageous in some instances (e.g. intentionally selling a new product below cost in order to gain market share).
- A low profit margin indicates a low margin of safety.