If you discover they counterintuitive you to definitely generating in which limited revenue equals marginal costs tend to optimize payouts, working from the wide variety can assist.

Step one. Think of, i establish limited prices as change in total price out-of creating a small amount of extra efficiency.

Step two. Keep in mind that into the Table 2, while the yields increases from 1 so you can 2 units, total cost develops out-of $500 so you can $775. Consequently, brand new limited cost of the second tool might be:

3. Just remember that ,, also, marginal revenue is the improvement in complete revenue out of promoting an effective handful of most output.

Step four. Note that from inside the Desk dos, due to the fact productivity expands in one to dos tools, full revenue increases out of $1200 in order to $2200. Continue reading →