1.

MarginalRevenueEqualsMarginalCostMethod
Thisapproachusesmarginalanalysisbycomparingmarginal
revenue(MR)andmarginalcost(MC).
MarginalCost(MC):Thechangeintotalcostastheoutputlevel
changesoneunit.
MarginalRevenue(MR):Thechangeintotalrevenuefromthe
saleofoneadditionallevelofoutput.
MR=(changeintotalrevenue)/(changeinoutput)
Sinceeachfirmisapricetaker,thesaleofeachadditionalunit
addstototalrevenueanamountequaltotheprice.Therefore,
marginalrevenueequalsthepricethatthefirmviewsasa
horizontaldemandcurve.

Graphically,MRisahorizontallineequaltomarketprice,andMC
followsaJshapedpattern.
Todeterminetheprofitmaximizinglevelofoutput,firmsusethe
MR=MCRule:Thefirmmaximizesprofitorminimizeslossby
producingtheoutputwheremarginalrevenueequalsmarginalcost.
2.

TotalRevenueTotalCostMethod
TotalRevenue(productprice*quantity)TotalCost=Total
ProfitorLossGraphically,profitismaximizedwhenthevertical
distancebetweenthetotalrevenueandtotalcostcurvesisthe
greatest.DRAWPICTURE.