Egt1

A. In a business world we want to maximize all profits as possible. With profit maximization you have to consider all factors such as production cost, sale prices and output levels to adjust in order to get a maximum on your return. Total cost to revenue is one of the major methods used for profit maximization. When using the total revenue to total cost method you obtain a profit by taking the total revenue and subtracting the total cost. What this means is taking the cost of running the business such as utility bills, rent, payroll, taxes etc. and subtracting that total cost to the total revenue of the business. Total revenue would be the amount of money the business brought in from products sold. If the difference between the two is at a positive then a profit is obtained. If not then the business needs to make some adjustments in some of the factor, sale price, production costs, output level, in order to make a profit in the business.

Marginal revenue to marginal cost is another profit maximization method used in the business world. When talking about marginal revenue this mean the added revenue that one more unit collects when being sold. Marginal Cost is the change in cost that happens when that one unit or good is produced. To reach profit maximization with both marginal revenue and marginal cost they both have to equal. This would mean a business would need to produce more of an output just as long as the additional good added more to the revenue than to the cost.

Goods should continue to be produced until marginal revenue and marginal cost reach equal to reach a maximum profit.

B. Marginal Revenue is all about adding one more product to productions to raise earnings to a particular business. When the business sells just one more of their products then more earnings are gained. According to the book Crash Proof, marginal revenue can be calculated by the change in total revenue divided by the change in number of units sold. So what this means is...