Egt 1 Task 1 Essay

877 Words Jun 28th, 2014 4 Pages
EGT 1 Task 1 A. 1. The profit maximization approach used when total revenue and total cost are compared is the largest positive gap or profit gained between total revenue less total cost. In the table provided the largest profit or profit maximization would be $540. When you produce 8 items profit is at its highest point. To calculate total revenue you take the price times the quantity and to calculate total cost you take the sum of variable and fixed costs. 2. The profit maximization approach used when marginal revenue and marginal cost are compared is to take the marginal revenue less the marginal cost. In this process you look at how each additional unit affects total revenue and total cost. Marginal revenue is equal to the change of …show more content…
1. . Marginal cost it the change in total cost divided by the change in quantity. To get total cost so that you can calculate marginal cost you need to take the total of fixed and variable cost. Marginal cost stays constant for a very short period in early production. But marginal cost usually increases once you begin to increase production. Below is the marginal cost for the table provided. If you notice for ever increase in quantity there is a increase in marginal cost
Quantity TC 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 10 30 50 80 120 170 230 300 380 470 570 680 800 930 1070 1220 MC 10 20 20 30 40 50 60 70 80 90 100 110 120 130 140 150

Marginal Cost
$200.00 $150.00 $100.00 $50.00 $0.00 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Marginal Cost

D. Profit maximization occurs when company A produces 8 products in either approach. The difference between total revenue and total cost is $540. This is the largest gap of profit with producing between 1-15 units.
Quantity TR 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
$1,300.00 $1,200.00 $1,100.00 $1,000.00 $900.00 $800.00 $700.00 $600.00 $500.00 $400.00 $300.00 $200.00 $100.00 $0.00 -$100.00 0 -10 1 120 2 3 4 5 6 7 8 9 240 340 420 480 520 540 540 520 480 420 340 240 120 10 11 12 13 14 15 -20 Total Revenue Total Cost Profit

TC 0 150 290 420 540 650 750 840 920 990 1050 1100 1140 1170 1190 1200 10 30 50 80 120 170 230 300 380 470 570 680 800 930 1070 1220

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