Tutors on net
Tutors on NetTutors on Net

Maximisation By Marginal Examination

 Maximisation by Marginal Examination

Illustration 13

Presume a firm has the following total revenue and total cost functions:

                        TR       =          640Q – 4Q^2
                        TC       =          3600 + 100Q + 6Q^2

You are required to ascertain (1) the level of productivity at which the firm optimises profit and (2) the level of productivity which optimises total revenue.


The profit optimising productivity can be ascertained by procuring MR and MC from the given Total Revenue and Total Cost functions correspondingly. The MR and MC are evaluated by the inclines at a point on these curves. Incline at a point of a function is weighed by the first derivative of the function. Considering the first derivative of total revenue function:

MR      =          ΔTR     =          640 – 8Q

Considering the first derivative of the total cost function,

                        MC      =         ΔTC     =          100 + 12Q

Setting MR = MC, we procure,

                        640 – 8Q         =          100 + 12Q

                        20Q                 =          540

                        Q                     =          540 / 20           =          27

Therefore, profit optimising level of productivity is 27.

It must be renowned that if we use total revenue total cost approach to procure maximum level of productivity, we will procure the same outcome.


Profits π          =          TR – TC

            π          =          (640Q – 4Q^2) – (3600 + 100Q + 6Q^2)

            π          =          640Q – 4Q^2 – 3600 - 100Q - 6Q^2

            π          =          540Q – 10Q^2 – 3600

Derivative of 540Q – 10Q^2 – 3600 is equal to

                    =          540 – 20Q

Now, profits will be optimised when the first derivative of total profit function is null or zero. Therefore, constructing

        =          0, we procure,

540 – 20Q       =          0

20Q                 =          540

Q                     =          540 / 20           =          27.

Incremental Analysis

Incremental Cost

            Incremental costs consists of current period explicit cost which incorporates costs incurred on direct labour on buying of inputs etc, opportunity costs which is forgoing alternative for accomplishing best use and Future costs that is any type consequents from a given decision. It may be noted that anticipated present value is evaluated and incorporated in the incremental cost of the decision.

Incremental Revenue

            Incremental revenue is diverse from revenue of consequents from implementing a decision. Enhancement in total revenue taken place by pronouncing about a connectively huge variation in productivity and innovation of fresh commodity line or a new skill or instigating an advertisement campaign outlay is termed as incremental revenue.

            Nevertheless, clangers are usually taken place by ailing informed supervisors about all incremental costs and incremental revenues. As described above, for optimal decision making only all relevant costs and revenues should be regarded while estimating the outcome of diverse decisions.

Online Live Tutor Incremental Analysis:

    We have the best tutors in Economics in the industry. Our tutors can break down a complex Incremental Analysis problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Incremental Analysis concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Incremental Analysis tutoring and experience the quality yourself.

Online Maximisation by Marginal Examination Help:

    If you are stuck with an Maximisation by Marginal Examination Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Maximisation by Marginal Examination help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Maximisation by Marginal Examination Homework Help. Please do send us the Maximisation by Marginal Examination problems on which you need help and we will forward then to our tutors for review.