The profit-maximising rule (MC=MR)
A firm maximises profit by producing the quantity where the cost of making one extra unit equals the revenue that unit earns. Economists write this as MC = MR.
Formula
Profit maximised where MC = MR
Real World
A low-cost airline like Ryanair fills its last few seats with deep discount fares — once the marginal revenue of an extra passenger falls to equal the marginal cost of serving them, it stops discounting.
Exam Focus
On a diagram, always drop a vertical line from the MC=MR intersection to the output axis before reading off price from the demand curve.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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