← Market structures and marginal analysis
Marginal analysis from a table (every paper)
Compute MC and MR columns, find MR = MC, state the price from the DEMAND curve. Exam-style P = 10, 9, 8, 7 at Q = 1, 2, 3, 4; TC = 4, 9, 15, 22 Profit-maximising output and price? TR = 10, 18, 24, 28 → MR = 10, 8, 6, 4 MC = 4, 5, 6, 7 MR = MC = 6 at the 3rd unit → Q = 3, price = $8 (read from DEMAND, not MR) Profit = TR − TC = 24 − 15 = $9 ✓ Q = 3 at P = $8, profit $9. The classic slip: charging the MR instead of the demand price. ℹWhy MR = MC maximises profit
For every unit where MR > MC the unit adds to profit; the first unit where MC > MR subtracts. Producing up to MR = MC captures every profitable unit and none of the unprofitable ones. ✕The price comes from DEMAND, never from MR
Once you find the profit-maximising quantity (where MR = MC), the PRICE charged is read off the demand curve at that quantity — never the MR value itself. For a price maker, MR sits below demand at every quantity above the first unit, so charging "the MR price" quietly undercharges and understates profit. Find Q from MR = MC, then go straight up to the demand curve to find P.A fast check before submitting a marginal-analysis answer
- Have I found Q where MR = MC (or the last unit where MR ≥ MC)?
- Have I read the price from DEMAND at that quantity, not from MR?
- Have I calculated profit as TR − TC at the chosen quantity, not at any other?