Total revenue is maximized at the price where demand has unit elasticity.

If demand is elastic at a given price level, then should a company cut its price, the percentage drop in price will result in an even larger percentage increase in the quantity sold—thus raising total revenue.

Total expenditures decrease because people buy less of the product when the price increases.

At low quantities and high prices, a firm can increase its revenues by moving down the demand curve—to lower prices and higher output. Marginal revenue is positive….Marginal Revenue and the Elasticity of Demand

1. Marginal revenue is always less than the price.
2. Marginal revenue can be negative.

Total revenue is the full amount of total sales of goods and services. It is calculated by multiplying the total amount of goods and services sold by their prices. Marginal revenue is the increase in revenue from selling one additional unit of a good or service.

A company calculates marginal revenue by dividing the change in total revenue by the change in total output quantity. Therefore, the sale price of a single additional item sold equals marginal revenue. For example, a company sells its first 100 items for a total of $1,000.

Price and total revenue have a negative relationship when demand is elastic (price elasticity > 1), which means that increases in price will lead to decreases in total revenue. Price changes will not affect total revenue when the demand is unit elastic (price elasticity = 1).

Yes, Variable Cost (VC) of producing units of output is the value of the integral of Marginal Cost (MC) over the range .

To determine the total variable cost the company will spend to produce 100 units of product, the following formula is used: Total output quantity x variable cost of each output unit = total variable cost.

In economics, the marginal cost of production is the change in total production cost that comes from making or producing one additional unit.

The Average Cost (AC) for q items is the total cost divided by q, or TC/q. You can also talk about the average fixed cost, FC/q, or the average variable cost, TVC/q. The Marginal Cost (MC) at q items is the cost of producing the next item. Really, it’s MC(q) = TC(q + 1) – TC(q).

The formula for calculating average total cost is:

1. (Total fixed costs + total variable costs) / number of units produced = average total cost.
2. (Total fixed costs + total variable costs)
3. New cost – old cost = change in cost.
4. New quantity – old quantity = change in quantity.

Marginal cost is the change in total cost when another unit is produced; average cost is the total cost divided by the number of goods produced.

There exists a close relationship between AC and MC. i. Both AC and MC are derived from total cost (TC). AC refers to TC per unit of output and MC refers to addition to TC when one more unit of output is produced.

When the MC is smaller the AC, the AC decreases. This is because when the extra unit of output is cheaper than the average cost then the AC is pulled down. Similarly, when the MC is greater than the AC, the AC is pulled up. The point of intersection between the MC and AC curves is also the minimum of the AC curve.

The fall is due to the economies of scale. But beyond a point (M), i.e., when output is expanded too much, both AC and MC start rising and now MC is above AC, i.e., the marginal cost is greater than the average cost. That is why MC cuts AC from below at its lowest point.

AC will reach a minimum at a level of output that is less than that at which MC reaches a minimum. both AC and MC will reach a minimum at the same level of output. If a firm’s marginal revenue is greater than its marginal cost, then the firm should. a.

AVC attains a minimum at an output of 12. The minimum of AVC always occurs where AVC = MC.

Since the TFC curve is horizontal, the difference between the TC and TVC curve is the same at each level of output and equals TFC. The TFC curve is parallel to the horizontal axis while the TVC curve is inverted-S shaped.

Explain. No. They don’t intersect each other because they are parallel to each other.

In the short run, total cost is equal to zero when output is equal to zero. In the long run, total cost is equal to zero when output is equal to zero.

Fixed Cost Formula Isolate all of these fixed costs to the business. Add up each of these costs for a total fixed cost (TFC). Identify the number of product units created in one month. Divide your TFC by the number of units created per month for an average fixed cost (AFC).