Question

Please explain how a particular firm that you know uses the stage of production in its production decisions. Also, please explain the significance of MR=MC for that particular firm. ( You may have to go to the internet to find a firm).

Intro to Ag Econ

Answer 1

In economics and business the first and foremost purpose of the individual or firm is to maximize profit. Every decision he takes is solely for the profit maximization.

In the production of any goods in any company there are two factors which should be considered,those are output and cost. The ratio of output should always be higher than the cost , in terms of getting the good revenue from the production.

Here marginal cost and marginal revenue plays a vital role . When the additional unit of production is used , producers should keep in mind the marginal revenue. When the profit is at the highest point the Marginal cost and revenue should be equal.

MR and MC are Coherent for each other. They should should be postively related in the process of production for the purpose of profit maximization.

In the different stages of production the producers uses his resources in the optimum way to maximize the profit.