Marginal Analysis - The graduate correctly applies marginal analysis.
Describe the relationship between marginal revenue and marginal cost at the point of profit maximization. Objective 309.1.1.06: Explain the concept of profit maximization.
Introduction: Business owners, managers, and aspiring entrepreneurs need to know the best form of business organization to select based on various considerations, including taxes, liability, capital contributions, sharing of profits and losses, management and control, and survivorship.
Task: Write an essay (suggested length of 1-3 pages) that explains the relationship between marginal revenue and marginal cost, and the importance of these concepts for profit maximization in which you do the following:
A. Define marginal revenue.
1. Explain its relationship with total revenue.
B. Define marginal cost.
1. Explain its relationship with total cost.
C. Define profit.
1. Explain the concept of profit maximization.
D. Explain how a profit-maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria.
E. Explain what action a profit-maximizing firm takes if marginal revenue is greater than marginal cost.
F. Explain what action a profit-maximizing firm takes if marginal revenue is less than marginal cost.
G. Include all in-text citations and references in APA format.