Profit are maximized when marginal revenue equal to marginal cost and marginal cost rising. Therefore, in order to obtain the equilibrium output we equate MC =MR.
In equilibrium, MC =MR
Total profit gets when total revenue minus total cost.
Substituting Q = 8
We take derivative of MC to fulfillment of second order condition i.e. MC is rising.
The positive sign of the second derivative of TC implies that MC is rising.
Demand curve shows the relationship between price and quantity of product. If quantity demanded is infinite at the prevailing price, but any rise in price will cause quantity demanded to fall to zero, is said to be perfectly elastic demand. Symbolically,
In perfect competition, the demand curve for the product by a firm is perfectly elastic at market price. The firm can sell all of the output at this price because its output is so small in comparison with the entire market of product. As a price taker, the firm cannot charge a higher price and lower price at the prevailing price.
Demand curve and marginal revenue curve are the same for a perfectly competitive firm.
Contribution margin is the amount of revenue that a firm earns above its total variable cost. A firm incurs a loss may continue operating in the short run if it has a positive contribution margin. A firm experiencing a negative contribution margin must shut down its operation because its revenue cannot cover its variable costs of operation.
it means that price is greater than average variable cost. It also indicates positive contribution margin. It is explained the following figure:-
In the figure
and positive contribution are the same.