9781118041581

Marginal Analysis 39

the marginal profit from a small (.1 lot) increase in output starting from 3.0 lots

is $10,000 per lot. The algebraic expression for marginal profit is

where the Greek letter delta () stands for “change in” and Q 0 denotes the

original output level and  0 the associated profit. The variables Q 1 and  1

denote the new levels of output and profit. We abbreviate marginal profit by the

notation M.

¢/¢Q[ 1  0 ]/[Q 1 Q 0 ],

Marginal profit[Change in Profit]/[Change in Output]

Using the profit function you found in Check Station 2, find the marginal profit of

increasing output from 99 to 100 units.

In Table 2.1, we have calculated marginal profits for various output levels.

The marginal profit associated with a given change in output is calculated

based on a .1-lot increase from the next lowest output. Thus, the Mfor an

increase in output from 2.9 to 3.0 lots is ($116,000 $114,600)/.1 $14,000.

CHECK

STATION 3

TABLE 2.1

Marginal Profit

Marginal profit is the

extra profit the firm

earns from producing

and selling an addi-

tional unit of output

Marginal Profit

Quantity Profit (per Lot)

2.5 $105,000

$30,000

2.6 108,000

26,000

2.7 110,600

22,000

2.8 112,800

18,000

2.9 114,600

14,000

3.0 116,000

10,000

3.1 117,000

6,000

3.2 117,600

2,000

3.3 117,800

2,000

3.4 117,600

6,000

3.5 117,000

10,000

3.6 116,000

14,000

3.7 114,600

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