Marginal Analysis Is Used to Determine

question 123

Multiple Choice

Marginal analysis is used to determine:

• A) the maximum profit by comparing maximum revenue and marginal cost.
• B) the profit maximising output.
• C) the market price resulting from a one unit change in output.
• D) the change in the total cost as the price changes.

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Definitions:

MC

Marginal Cost, the change in total cost that arises when the quantity produced changes by one unit.

AVC

Average Variable Cost; the total variable cost divided by the quantity of output produced, representing the variable cost per unit.

ATC

Average Total Cost, the per unit cost of production that includes all fixed and variable costs.

MR

Marginal Revenue, the additional income earned from selling one more unit of a good or service.