Marginal terms in production

1.

But this point does not
Maximum efficiency is
necessarily correspond to
achieved here
maximum profits
In order to know the most
profitable level of production, it is
necessary to know the marginal
(incremental) revenue, marginal
(incremental) cost, marginal
product in terms of money

2.

Marginal revenue is the extra revenue obtained from selling one more
unit
If the unit price remain unchanged, then marginal revenue is simply the price per unit
TR
MR
Q
Q
Marginal cost - the additional
costs while increasing output
by one additional unit of output
TС
M
СQ
Q

3.

Marginal product is the additional amount of product received as a
result of the use of one additional unit of variable input factor of
production
Q
MP
X
X
Marginal product in the monetary form - additional income resulting
from using of one additional unit of variable input factor of production
MRP
MR
MP
x
Q
x

4.

ЕХ: ] additional production, when taking into account only labor, per
hour (МРL) is equal to 50 units and the products are sold at a price of $
0.5 per unit (МRQ):
Marginal product in the monetary form : MRPL = 0,5$ х 50 = 25$
=> each additional hour of labor brings 25$ income
If additional costs for labor are less than 25$ per hour,
then the firm can earn additional income and additional
profit

5.

Getting profit by attracting labour force will occur until
the marginal product in terms of money numerically will be
greater than or equal to the price of labour
The condition for profit maximization:
MRPX = PX

6.

The condition for profit maximization:
MRPX = PX
the profit is maximum when marginal cost equals marginal revenue
MCQ = ∆TC / ∆Q = (Px x ∆X) / ∆Q = Px (∆X / ∆Q) = Px / MPx = MRQ

7.

MRP
MR
MP
x
Q
x
Each of the two factors in the ultimate product, expressed in cash
(MRQ and MPx) can be either variable or constant
If this company deals with the production,
which is characterized by gently lowering
demand curve,
in this case, marginal revenue is variable, decreasing with
increasing output or increasing volume of sales

8.

MRQ
MRP
MR
MP
x
Q
x
If the firm sells its products on the market, which itself sets the price,
than marginal revenue is constant

9.

MRP
MR
MP
x
Q
x
MPx
Marginal product may vary due to the law of diminishing returns
But it could be permanent: the law of diminishing returns
does not apply to some factors of production

10.

ЕХ: the company produces cars. Input factor of production - 4
wheel, allows to obtain the marginal product in the form of
the car. This marginal product will never change

11.

Рх
MRPX = PX
The unit price of the input factor of production, Px, can also be
variable in the sense
that it can and will change over time
However, at any given point in time, it will have a certain value
that will determine the optimal level of output

12.

Marginal product in the monetary form :
MRP
MR
MP
x
Q
x
TR
MR
Q
Q
Q
MP
X
X
TR
MRPX
X
Marginal product in the form of money
represents the change in total revenue per
additional unit of input factors of production

13.

Westland Electronics