...Marginal Analysis In economics, there are three important terms, marginal revenue (MR), marginal cost (MC) and profit (P). Marginal revenue is defined as a change in total revenue that comes from selling one more unit of output. However, when applied to a pure monopoly, marginal revenue is less than the price of all levels of output except the first level. Marginal cost is the additional cost of making one more unit of output. It can be determined by noting the change in total cost which the unit’s production entails. Profit can be divided into two separate terms, normal profit and economic profit (McConnell & Brue, 2008). In the definition for marginal revenue the term total revenue is mentioned. When a company is thinking about changing a products output or quantity (Q), it must think about how the total revenue will change. Total revenue (TR) is the total amount received from the sale of a given amount of output. It can be determined by multiplying the price by the corresponding quantity a company can sell. This brings us back to marginal revenue. Marginal revenue is determined by the change in total revenue divided by the change in quantity (McConnell & Brue, 2008). The formula for this is: MR=ΔTR/ΔQ Within the definition for marginal cost, the term total cost is given. Total cost (TC) is found by adding total fixed cost (TFC) and total variable cost (TVC) together. The formula for this is: TC=TFC+TVC. Once total cost has been determined then marginal cost...
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...Marginal Productivity Analysis Kenneth Machol ECO 265 January 28, 2013 Christopher Rakovalis Marginal Productivity Analysis MARGINAL PRODUCTIVITY THEORY: A presumption used to study the profit-maximizing amount of inputs (so as to is, the services of feature of productions) obtained through a company into the assembly of amount produced. Marginal-productivity presumption indicates to the command used for a feature of manufacture is based on the marginal result of the issue. In meticulous, a company is usually eager to shell out an elevated cost intended for the input that is extra dynamic and gives extra to productivity. The command for an input is therefore preeminent termed a consequential command. Marginal productivity assumption is a foundation inside the study of feature markets and the input side of short-run creation. It sheds insight into the order for factors of construction based on the vision that a profit-maximizing business hires inputs based on a judgment connecting the productivity of the input and the price of the input. The rule of Diminishing Marginal proceeds a vital code fundamental marginal-productivity presumption is the rule of diminishing marginal takings. This rule says that as added units of a variable input are extra to a set input, ultimately the marginal result of the variable input decreases. This code is a vital part of short-run assembly study, which offers insight into the positively-sloped marginal price bend...
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...Marginal Analysis Task 1 Before a company can know the maximum profit to obtain for their industry, they must review and consider many factors. Some of the concepts that are analyzed when making business product decisions are Marginal revenue, marginal cost, profit-maximizing and total cost. Marginal revenue is the total revenue charged when one more unit of output is produced. When you multiply the unit price by the quantity the company can sell this determines the total revenue earned. When the first unit is purchased and equals the marginal revenue this increases the total revenue. The marginal revenue will stay at the same original cost when the second unit is produced but the total revenue will increase. The second unit when sold will make marginal revenue stay the same by the total revenue will double in cost. Marginal revenue is equal to the change in total revenue over the change in quantity when the change of quantity is equal to one unit. The marginal revenue must be greater than zero when selling another unit increases total revenue. If the marginal revenue is less than zero then the sale of another unit will take away from the total revenue. This relationship then exists because the slope of the total revenue curve is measured by marginal revenue. The extra cost to produce one additional unit of output is called Marginal cost. To find Marginal cost you take the total cost and divide it with the production details of that unit. The total cost will include fixed...
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...In a basic principle of efficient road user charging the user must be charged for all the additional costs, because they imposed by their used of the road system. Marginal external cost is an additional cost while marginal social cost are cost its borne directly by the user. This principle that all costs are valued at the compensation that needed to those willing to do. They have two main constraints in the development of road user charging the technical and economic. Charging has two form the Fuel duty and Vehicle excise duty. Efficient prices (MSC- MARGINAL SOCIAL COST CONCEPT). Have two concepts: SHORT RUN which pricing translates into, in terms of road pricing, is a need to measure three components of cost. The first is the cost imposed...
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...Marginal Analysis CanGo wants to branch out and focus sales on other products other than books. They are taking on a lot of financial responsibilities that may not be worthwhile for the company. CanGo wants to make the online gaming venture successful and wants to venture into different types of online sales. Recommendation: #1. CanGo is in need of a marginal analysis. A marginal analysis would include economic view of how the company would spend its dollar. The analysis would also be able to show the company whether the money is being spent necessarily. It will also let CanGo know whether they are able to take on new business ventures. The marginal analysis will assist CanGo with analytical decision making. #2. By doing a marginal analysis this will help CanGo decide whether employee shifting would be feasible or whether they should hire new staff. Even though the company would not be able to determine the exact outcome of the decision, the analysis will give them a rough idea of what to expect. Cost Benefit Analysis CanGo has not currently had a cost benefit analysis done on the company. With a cost benefit analysis, it gives the company an analysis of a business decision that they are proposing. This will give them an idea on whether the company is financially stable to take on a new project or venture. The cost benefit analysis would include all costs associated with the new venture including warehousing fees and price that the product will be sold for. This is...
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...Marginal Analysis Marginal revenue is additional income; an increase in revenue created by an added unit of a company’s product. Marginal revenue is discovered by dividing the change in the total revenue by the change in output quantity. Marginal revenue is calculated by dividing the change in the total revenue by the change in the output quantity and this is how it relates to total revenue. [McConnell and Brue, 2013]. The total revenue will increase as the marginal revenue increases. Total revenue is the combination of all the company’s income on the whole not just sales for a stretch of time. The rate that can be charged harmoniously with selling a quantity of goods is equal to total revenue. To figure out marginal revenue, use the TR=P(Q)*Q formula. Total cost is the combination of all the company’s costs including fixed and variable costs. “When marginal revenue greater than marginal cost company should increase production and if marginal cost greater than marginal revenue company should decrease production. The goal for the company is to allow marginal cost to equal marginal revenue. " [McConnell and Brue, 2013]. Marginal cost is the change in the total cost of production for an additional unit. It is considered a variable cost. This includes any additional costs include labor and materials. A variable cost is an expense that changes in relationship to the activity of the business. The total cost relationship to marginal cost is the variable cost. The variable...
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...AN ANALYSIS OF THE EFFECTS OF MARGINAL TAX CUTS SAYANTAN MITRA In my last paper, I argued in favor of the across-the-board tax-cuts proposed by the Republican presidential candidate Mitt Romney. With the help of instances from both micro as well as macroeconomics, I showed how a reduction in marginal and corporate taxes was beneficial for the economy. I used the growth in Gross Domestic Product (GDP) as a measure of the positive direction which the economy would take as a result of tax-cuts. I used empirical evidence to show that the tax-cuts on previous occasions have resulted in economic growth and increase in GDP of the United States. My detailed arguments and results can be found in the Appendix. In this paper I will analyze the effects of marginal tax-cuts on the different income groups, the high income and low income households. I will also analyze the variations in marginal propensity to save taking account demographic characteristics such as age group and education level as well as income. This would aid in an analysis of which portions of the population would be benefitted from a tax-cut. Therefore, I would like to would policy prescriptions for cutting taxes. When there is a reduction in payroll tax rates, it can have different effects on the different parts of the population. For low-income households, a tax-cut would encourage them to work for more hours. On the other hand, for high-income households, it may lead to them working lesser. These can be explained...
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...Analysis of “The Limitations of Marginal Utility” by Thorstein Veblen Marginal Utility by definition is the additional satisfaction a consumer gains from consuming one more unit of a good or service, which is usually positive, but can be negative. The concept implies that the utility or benefit to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns. The notion of marginal utility originated with attempts by 19th-century economists to examine and describe the economic validity of price. They believed price was partially determined by a commodity’s utility, which led to a paradox when applied to predominant price associations. This problem, commonly referred to as the paradox of value, was resolved with the concept of marginal utility. An example of this is between two goods like high value gold, and low value rice. Because gold is very scarce and its demand was great, the acquisition of additional gold was a great priority. Therefore, their marginal utility was higher, and consumers would be willing to pay a comparatively high price for them. Rice, on the contrary, is much less valuable only because it is much more abundant, and the purchasers of rice have enough to satisfy their needs for it. Additional purchases of rice beyond people’s appetite for it will be of decreasing benefit or utility and will eventually lose all utility beyond the point at which hunger is completely satisfied. (Britannica, 2014)...
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...EGT1 Task 1 Marginal Analysis Student Name Western Governors University Student ID: The primary focus of this paper is to demonstrate the concepts of marginal revenue and marginal cost, how the two are related to each other and how they are used by a company in profit maximization. By factoring, analyzing and comparing the various data on revenue and cost, a company can use a marginal analysis to determine the best direction to maximize profits. A marginal analysis is the “comparisons of marginal benefits and marginal costs, usually for decision making” (McConnell, 2011, p. 6). A. There are two methods to describe profit maximization. Further details of both methods and how each are used to determine profit maximization are as followed: 1. One method of understanding profit maximization is by using the relationship of total revenue and total cost. Total revenue is the total income that a company receives from a product or service. The price multiplied by the quantity of the product or service equates to the total revenue. Total cost is the total expense or cost to a company to produce a product or provide a service. Profit is determined by subtracting the total cost from the total revenue. Initially, as production or quantity increases, profit increases as well. There is a point, however, where the profit will maximize and then begin to diminish as the unit quantity increases. This point is where the greatest profit is realized in relation to the total revenue...
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...interest rate: A. | the greater the present value of a future amount. | B. | the smaller the present value of a future amount. | C. | the greater the level of inflation. | D. | None of the statements associated with this question are correct. | | 2. | If the interest rate is 10 percent and cash flows are $1,000 at the end of year one and $2,000 at the end of year two, then the present value of these cash flows is: A. | $2,562. | B. | $3,200. | C. | $439. | D. | $3,000. | | 3. | Accounting profits are: A. | total revenue minus total cost. | B. | total cost minus total revenue. | C. | marginal revenue minus total cost. | D. | total revenue minus marginal cost. | | 4. | Economic profits are: A. | total revenue minus total cost. | B. | marginal revenue minus marginal cost. | C. | total revenue minus total opportunity cost. | D. | total profits of the economy as a whole. | | 5. | Which of the following is an implicit cost to a firm that produces a good or service? A. | Labor costs | B. | Costs of operating production machinery | C. | Foregone profits of producing a different good or service | D. | Costs of renting or buying land for a production site | | 6. | Which of the following is an implicit cost of going to college? A. | Tuition | B. | Cost of books and supplies | C. | Room and board | D. | Foregone wages | | 7. | Which of the following are...
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...COST-VOLUME-PROFIT ANALYSIS IN DECISION MAKING GABRIELA BUŞAN, IONELA-CLAUDIA DINA * ABSTRACT: The cost-volume-profit study the manner how evolve the total revenues, the total costs and operating profit, as changes occur in volume production, sale price, the unit variable cost and / or fixed costs of a product. Managers use this analysis to answer different questions like: How will incomes and costs be affected if we still sell 1.000 units? But if you expand or reduce selling prices? If we expand our business in foreign markets? KEY WORDS: cost-volume-profit, marginal contribution, break-even, the equation method, the marginal contribution method, graphical method The cost-volume-profit is a necessary tool for forecasting also for management control. The method includes a number of techniques and methods of solving problems based on understanding patterns of evolution characteristics of business costs. The techniques express the relationship between incomes, sales structure, costs, production volume and profits and include break-even analysis and profit forecasting processes. This relationship provides a general model of economic activity, which management can use to short-term forecasts for business performance evaluation and analysis of decision alternatives. The marginal contribution is the difference between total revenue and totals variable costs and explains how changes the operating profit as changing the number of units sold. Can be calculated thus: Marginal contribution...
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...ROCHESTER INSTITUE OF TECHNOLOGY SAUNDERS COLLEGE OF BUSINESS SPRING QUARTER 2012-2013 ECONOMIC FOR MANAGERS BTM Game Analysis Report Firm 1 Binal Patel Kun Liao Ling Xiao Lei Wella Mohibi Yi xin Huang 1 1) Table of Contents 2) Introduction and Summary Our performance in BTM game Market structure analysis Strategies of our firm 3) Analysis of our problems in the BTM game MC and MR Plant size Price elasticity Training and process improvement advertising, product development and E-commerce 4) How to improve our performance in the future Macroeconomic analysis Competitor analysis Payoff matrix Kinked demand 5) Conclusion 2 1. Introduction and Summary Our performance in BTM game Our firm is a very good example of how to learn beat the market game because at beginning, none of our team members had any experience with making business decisions hence, we had poor performance at the beginning. But with hard work and learning how to apply economic theories to the game, we did much better in the last 3 quarters and enhanced our rank. Our final rank in the game is 5th . We ranked 6th in quarter 1 and quarter 2 and then because the poor performance, our rank went down to 7th in quarter 3. However, in quarter 6, we did very well and enhanced the rank from 7th to 6th. Then we kept doing well in quarter 7, which made us achieve the 5th position. Based on Figure 1 we can see that, during 8 quarters, we performed poorest in quarter...
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...Major Assignment 1) a) Demand Function: Quantity Demanded (Qd) = a + b* Price (P) Supply Function: Quantity Supplied (Qs) = a + b* Price (P) Where: a = constant b = the change in quantity as a result to the change in price. Demand Function: Quantity Demanded (Qd) = a + b* Price (P) b = (420 – 350) / (20 – 25) = 70 / -5 = -14 Using: P = 25, Qd = 350 350 = a – 14 * (25) 350 = a – 350 Therefore a = 700 and the demand function would be: Qd = 700 – 14 * P Supply Function: Quantity Supplied (Qs) = a + b* Price (P) b = (350 – 420) / (20 – 25) = -70 / -5 = 14 Using: P = 25, Qs = 420 420 = a + 14 * (25) 420 = a + 350 420 – 350 = a Therefore a = 70 and the demand function would be: Qs = 70 + 14 * P b) Graph Showing Equilibrium Price e = Equilibrium point EquilibriumhasesaeEquilibrium point e Figure 1 Note: From the graph above the equilibrium price is approximately $22.50 c) Economically speaking, the goal of a company is to maximize profit, and maximizing profit is not usually the same thing as maximizing revenue. Therefore, while it may be appealing to think about the relationship between price and revenue, especially since the concept of elasticity makes it easy to do so, it's only a starting point for examining whether a price increase or decrease is a good idea. If a decrease in price is justified from a revenue perspective, one must think about the costs of producing the extra output in order to determine whether the price...
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...Cell Phone Company Clair Smith ECO/561 March 17, 2014 Cell Phone Company Cell phones have evolved over the years since 1973 when Dr. Martin Cooper while working for Motorola invented the first personal handset (Keith, 2004). In 1988 another important event occurred for the cell phone industry, which is when The Cellular Technology Industry Association is formed (Keith, 2004). The association is what helped form the cellular industry into the empire it is today (Keith, 2004). Cell phones are very popular now and many people have cell phones, but no longer have a landline. The population is growing and the need for more cellular providers is great. The increasing demand is why I want to start a new company where cell phones, accessories, and cell phone services will be provided. There are four market structures that an industry can evolve through. The first is market structure is the pure monopoly and is where one company is the sole seller or producer of a good or service (McConnell, Brue, & Flynn, 2009). In 1973 when the first one was invented the cell phone industry was in the pure monopoly market structure. Over the years though as the industry grew the market structure changed. The next stage that the industry entered into was the oligopoly market, which is when there are only a few sellers that offer a standardized product or service (McConnell, Brue, & Flynn, 2009). The next market stage the industry moved into was the pure competition stage, which is when...
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...The Theory of Production Production: the creation of any good or service that has economic value to either consumers or other producers. Production analysis focuses on the efficient use of inputs to create outputs. The process involves all of the activities associated with providing goods and services. Examples: a. physical processing or manufacturing of material goods b. production of transportation services c. production of legal advice d. production of education e. production of invention (R & D) f. production of bank loans Production refers to the transformation of inputs or resources into output of goods and services. Inputs are the resources used in the production of goods and services and are generally classified into three broad categories—labour, capital and land or natural resources. They may be fixed or variable. Fixed Inputs are those that cannot be readily changed during the time period under consideration except, perhaps at a very great expenses. (e.g., a firm’s plant). Variable Inputs are those that can be varied easily and on very short notice (e.g., most raw materials and unskilled labour). The time period during which at least one input is fixed is called the Short-Run, while the time period when all inputs are variable is called the Long-Run. The length of the long-run depends on the type of industry, e.g., the long-run for a dry cleaning business may be a few weeks or months. Generally, a firm operates in the short-run and plans increases...
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