Marginal Revenue (\"MR\") and Marginal Cost (\"M) What happens if you produce on
ID: 1141711 • Letter: M
Question
Marginal Revenue ("MR") and Marginal Cost ("M) What happens if you produce one more item? In plain English: If the next item you produce adds more to revenue than to costs, it pays to mak If the next item you produce adds more to costs than to revenue, you lose by m In Economic Terminology If MR is greater than MC, Yes If MC is greater than MR, No Coal Price/Ton: $36.50 Cost of Total Total Average Total Total No. of of New Mine in Millions Cost in Cost Revenue Revenue Profit in Mines Dollars/Ton of Tons Millions per Ton per Ton In Millions In Millions $29.50 $30.50 $32.50 $36.00 $40.50 $46.50 $55.00Explanation / Answer
We are given the price of coal per ton = 36.50$
So as long as our cost of production of coal per ton is less than 36.50 we continue to make a profit.
So we need to check a point where the marginal cost of production is going to rise above 36.50$
On the graph, this lies approximately at the point between 4 and 5 mines are functional
This means that if 4 mines are functional the cost would be less than 36.5 and the cost would rise if 5 mines are fucntional
hence it is optimal and profitable to run 4 mines