ECON 200 Lecture Notes - Lecture 13: Marginal Revenue, Root Mean Square, Variable Cost

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greengiraffe718

28 Oct 2018

School

University of Maryland

Department

Economics

Course

ECON 200

Professor

Hossein Abbasi

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Document Summary

Firms make decisions on how much of a good to produce. Like any other choice, this involves cost-bene t analysis. We will study the marginal cost and marginal revenue of production. A rm"s goal is to maximize pro ts: pro t = total revenue total cost. Total revenue is the amount that a rm receives from the sale of goods and services and is calculated as the quantity sold multiplied by the price paid for each unit: total revenue = quantity. A rm"s total cost is de ned as: total costs = fixed costs + variable costs. Fixed costs are costs that do not depend on the quantity of output produced. (cid:12254) one-time, upfront payments before production begins, like buying equipment. (cid:12254) ongoing payments, like monthly rents. Even if a rm produces nothing, it still incurs a xed cost. Variable costs are those that depend on the quantity of output produced. (cid:12254) includes raw materials as well as labor costs.

Related Questions

a. Private firms seek to maximize (per unit profits , total profits , total revenue, or total costs)

b. The amount by which Total Cost rises when one more unit is produced is called the (total profit, total loss, marginal cost, or total revenue)

c. For firms in perfectly competitive markets, the amount by which the Total Revenue rises when one more unit is sold is called the (total cost marginal revenue, marginal cost, or marginal profit), and this is equal to the (total cost , quantity of output total price or total profit).

(each are fill in the blank and need one of the terms listed).

ultramarinewoodchuck739

a. Private firms seek to maximize (per unit profits , total profits , total revenue, or total costs)

b. The amount by which Total Cost rises when one more unit is produced is called the (total profit, total loss, marginal cost, or total revenue)

c. For firms in perfectly competitive markets, the amount by which the Total Revenue rises when one more unit is sold is called the (total cost marginal revenue, marginal cost, or marginal profit) , and this is equal to the (total cost , quantity of output, total price or total profit) .

(each are fill in the blank and need one of the terms listed).

greymouse802

Tom Railbon is an artist. He has a particular piece of sculpture that he makes and sells at local art fairs. He sells the sculpture for $220. Recently he decided it was time to actually do an economic analysis of his business to see how many pieces he should sell to maximize his profit. He came up with the following analysis of his costs:

Quantity; Total Variable Cost

1 $200

2 $380

3 $540

4 $720

5 $920

6 $1,170

7 $1,470

In addition to the variable costs, he also figures he has $100 in fixed costs. Using that information complete the following table:

Quantity; Total Variable Cost; Total Cost; Marginal Cost; Total Revenue; Marginal Revenue

1 $200

2 $380

3 $540

4 $720

5 $920

6 $1,170

7 $1,470

Now, using the marginal cost and marginal revenue, explain what quantity Tom should produce to maximize his profit.

raspberrywater-buffalo209

ECON 200 Lecture Notes - Lecture 13: Marginal Revenue, Root Mean Square, Variable Cost

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