Economics Profit Maximization Questions
Marginal revenue refers to the additional revenue generated from selling one more unit of a product or service. It is calculated by dividing the change in total revenue by the change in quantity sold. Marginal revenue is important in profit maximization as it helps businesses determine the optimal level of production and pricing. In order to maximize profits, a business should continue producing and selling additional units as long as the marginal revenue exceeds the marginal cost. Once the marginal revenue equals the marginal cost, profit maximization is achieved.