(i) Explain how MR and MC are used to determine the optimal (maximum) allocation of resources to a particular product?
(ii) Assume a position of business manager in certain firm. You just realized that MC exceeds MR. What will be your decision in allocating resources to this particular product? Explain why Marginal revenue (MR) is the change in total revenue due to an unit change in quantity. Similarly marginal cost (MC) is the extra cost od manufacturing a unit. These two concepts are very useful in optimal allocation of resources.