Overview
Marginal costs and total revenue are fundamental concepts in economics that help businesses make informed production and pricing decisions. Marginal cost refers to the additional cost incurred when producing one more unit, while total revenue is the total income generated from sales. Understanding t...
Key Terms
Example: If producing 10 units costs $100, and producing 11 units costs $105, the marginal cost is $5.
Example: If a company sells 100 units at $10 each, the total revenue is $1,000.
Example: If total revenue is $1,000 and costs are $700, profit is $300.
Example: If fixed costs are $500 and variable costs are $5 per unit, the break-even point is 100 units.
Example: A business may analyze whether to invest in new equipment by comparing costs to expected revenue increases.
Example: A factory may reduce costs per unit by producing 1,000 units instead of 100.