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Etg 1 Task 1

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Explain profit maximization from the following approaches:
Total revenue to total cost –
In order to project what profits a company will generate, we will use two factors, total cost and total revenue. The total revenue is determined by multiplying the product of sales (quantity) by the given price. TR=P*Q
The total cost is what a company pays for production of a product which includes both total fixed cost (TFC) and total variable cost (TVC). Whereas TC= TFC + TVC (Q) at each level a unit is produced. Once the total cost is deducted from the total revenue earned, the amount left over is profit. The business goal is to maximize profits by using the most efficient processes.
Marginal revenue to marginal cost - For firms to find the maximum profit point, they view the marginal revenue (MR) – which is the total gain in revenue from selling an additional unit of product. The marginal cost – (MC) is the total additional cost of producing one more unit of product. A company will continue to produce more product as long as the additional unit produces more revenue than cost.
So firms should continue to produce more output until marginal revenue is equal to marginal cost. This will be where profit is maximized. This will show the calculation used to determine marginal revenue. Marginal Revenue can be found using calculus.
Since MR is the change in total revenue (TR) that occurs when and additional unit of output is produced and sold, MR is the derivate of total revenue taken with respect to quantity. This the formula is used to determine the marginal revenue. ΔTR/ ΔQ
Now I will show how marginal revenue increases, decreases, or remains constant in the given scenario. MR decreases as the quantity increase. Applying the ΔTR/ ΔQ equation shows that as more units are produced the firm earns $10.00 on each additional unit of output. For example, a company producing

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