Marginal Analysis (3.2)

What does C(x) represent?

• Cost

• Profit

• Revenue

• Marginal Cost

Answer explanation

The cost function is the sum of the fixed cost and variable quantities needed to produce a good or service.

C(x) = (fixed cost) + x(variable costs)

What is the profit function, P(x)?

• P(x) = C(x) - R(x)

• P(x) = R(x) + C(x)

• P(x) = R(x) - C(x)

• P(x) = C(x) + R(x)

Answer explanation

Profit is calculated by subtracting the costs from the revenue.

What is the equation for average revenue?

What is the equation for average cost?

• R(x)

• xC(x)

Answer explanation

Average Cost is calculated by dividing the total cost, C(X) by the total output, x.

What is the equation for average profit?

• P(x)*x

• x^2

The equation for finding marginal cost is:

• C'(x) = C(x+1)-C(x)

• C(x)-1

• C(x-1)+C(x)

• C(X-1)=C(x)+C'(x)

What does marginal cost mean?

(a)  

Answer explanation

The marginal cost at x, given by C'(x), is the approximate cost of the (x + 1)st item

the marginal cost is the change in total production cost that comes after producing one additional item

The equation to find marginal profit is:

• P'(x) = P(x+1)-P(x)

• P(x+1)=P(x+1)+P'(x)

• P(x+1)=P(x)-P'(x)

• P(x)=P'(x)+P(x)

The equation to find marginal revenue is:

• R(x+1)=R(x)-R(x)

• R'(x) = R(x+1)-R(x)

• R(x)=R(x)+R'(x)

• R(x)=R'(x)+1

The relationship among the marginal cost, profit, and revenue follow the same relationship among the total cost, profit, and revenue

• True

• False

Answer explanation

MP(x)=MR(x)-MC(x)

and

P(x)=R(x)-C(x)