perfect competition 2 marginal cost and total cost & MC = MR

uses diagram to show calculating total costs from ATC and the reasons behind the MC = MR idea of profit maximization

Category:

Education

Tags:

• perfect
• competition
• marginal
• cost
• revenue
• profit
• maximization
• model

[belkincircle1]

@sherzodibrohim no you're thinking about it incorrectly. As long as the cost of making one extra unit is less than the revenue generated from selling the extra unit, then the company will keep making more units. Granted, as the you get closer and closer to the point where MC=MR you will make less and less profit on each unit you sell, but you are still making a profit! So companies keep producing up until a point where, if they produce any more, they will lose money. That point is where MC=MR.

[XjoelburrX]

Very Helpful

[nolla454]

you're explaining so detailed...it is helpfullll... thanks!

[ptrstepniak2]

@Instantkiwi cost decreases at first and then increases due to the fact that workers could for instance get lazy, so the efficiency of work goes down = increase in cost.

[twelvedo11ars]

@belkincircle1 this is, of course, under the assumption the firm is underproducing their units. This concept helps balance out the diseconomies of scale.

[corkywagz]

Turn your levels down! you are blowing out my speakers!!!

[xUmberBlackstonex]

why can't you replace my econ teacher???

[xUmberBlackstonex]

aaah!! now i get it.... :)

[MioWonng]

Amazingggg :D

[Tonycz25]

Thank you! Thank you! Thank you! These videos gave me that aha! moment.

[instantkiwi]

But why toes MC increase with production of more units? Does it always? I thought cost per unit would come inevitably down the more units produced

[sarmiray24]

Excellent!!