Marginal revenue

In this case, the marginal costs per unit are greater than marginal revenues (i.e. selling prices), so the farmer will be in trouble. He or she would effectively be paying customers to take away the produce, and making a loss on every sale. This should not be sustained. 

Here, marginal costs are lower than marginal revenues, so a profit is being made, but the level of contribution is not enough to maintain fixed assets and to leave sufficient profit to make the business worthwhile. This can be sustained for the short-term only, unless the enterprise is in some way contributing to the success of a more profitable product. 

Marginal revenue exceeds marginal cost, and the total contribution is enough to cover fixed costs. This can be sustained. 

Using a well known result, for a linear demand curve, marginal revenue is MR = (-a/ ) + (2/p)q. The profit maximizing output is that at which marginal revenue equals marginal cost, or 10. Equating MR to 10 and solving for q produces q = a/2 + 5p, so we require a confidence interval for this combination of the parameters. 

The marginal revenue is the average gross margin per prescription. Recall from Table 16-4 that the average gross margin under the new Better Health contract is 7.02 per prescription. 

The first of these impacts, which always takes place, reflects the fact that, as each unit of production is now more costly, the level of output at which marginal cost equals marginal revenue will also necessarily be lower. The extent to which this factor results in lower output depends critically on the number of other firms in the market that also face the marginal cost increase. 

As an essential first step toward optimizing profit, a firm must decide how much product to sell and at what price. The income from sales or total revenue TR of firm for selling a product is simply pq. The marginal revenue MR is d(TR)/dq. The profit K is the difference between the firm s total revenue and total cost ... 

For an elastic demand, the marginal revenue MR is positive, and for an inelastic demand the MR is negative. Finding the equation for marginal cost gives... 

Sharppencil According to sound financial policy, you should continue to produce till the day your marginal cost per barrel of oil equals your marginal revenue. On the other hand, a sound accounting practice is to depreciate your capital cost of 200,000 evenly over the life of the well so if the well lasts 20 years, your depreciation cost would be 10,000 per year. 

If it is assumed that all patients who have a positive net benefit take the drug, then if C is the marginal cost of selling one drug, the marginal revenue per sale is p — C and per potential prescription is proportional to... 

Given this combination, however, it is in the producer s interests to reveal the information, lose all the high-risk patients as potential customers, but shift the price to 0.55 gaining a marginal revenue of 0.86 x 0.122 = 0.105, from low risk patients only, which is slightly higher than before. 

In fact, marginal revenue equals the price minus a (positive) term which measures the extent to which the firm is able to influence price by a change in its output (known as the elasticity of demand). 

There is a relationship between sellers revenues and the elasticity of demand for their products and services. To establish this relationship we need to define the concepts of total revenue, average revenue, and marginal revenue. Total revenue is the total amount spent by buyers for the product (TR = P X Q). Average revenue is the total outlay by buyers divided by the number of units sold, or the price of the product (AR = TR/Q). Marginal revenue refers to the change in total revenue resulting from a change in sales volume. 

The normal, downward-sloping demand curve reveals that to sell an additional unit of output, price must fall. The change in total revenue (marginal revenue) is the result of two forces (1) the revenue derived from the additional unit sold, which is equal to the new price and (2) the loss in revenue which results from marking down aU prior saleable units to the new price. If force (1) is greater than force (2), total revenue will increase, and total revenue will increase only if marginal revenue is positive. Marginal revenue is positive if demand is price elastic and price is decreased, or if demand is price inelastic and price is increased. 

It is worthwhile noticing that the contract parameters yv,b) need to be chosen such that w-(c-v) second inequality is to prevent the retailer from profiting through the buy back process. Similarly, since the supplier s marginal revenue and the marginal cost are w - and c-v, respectively, the first inequality prevents the supplier from profiting through the buy back process. 

Define the X axis as the probability that the buyer s value exceeds a certain value, 1 — Gi vi) = q, and the Y axis as value v. For each buyer i, graph the inverse of her cumulative distribution function Gi (where Gi ai) = 0, Gi bi) = 1) (see Figure 3.3). This represents the buyer s demand curve. The buyer s revenue is qvi, where Vi = G 1 — q). From the demand curve for each buyer, we may compute the buyer s marginal revenue as follows, i.e.,... 

Clearly, the buyer s marginal revenue is identical to her virtual valuation (3.37). In setting up the reserve price, the intermediary may be thought of as a buyer with a value and marginal revenue of zero. Thus, the intermediary offers the object to the buyer with the highest marginal revenue so long as it is positive (above her own). 

As is stated before collaboration can reduce the waste levels. The impact on the profit depends on the possibility of price setting and on the actor who realizes the waste reduction. The micro-economic theory has been followed if monopoly price setting is not possible marginal costs are equal to marginal revenues. This is indicated as spot market. In the second case a monopoly price setting is assumed the prices remain at the actual level. This assumption can only be realized if other wholesalers and retailers do not copy the approach of waste reductions. So the assumption will than be that at each level more actors are involved. 

Highly competitive industry - Price pressure - Rapid technological change - Intense competition from existing companies and new entrants - Price erosion - Profit margin - Revenue - Operating result... 

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