Deriving Marginalism

Students will be able to:

• Define marginal, total, variable, and fixed costs.
• Describe the relationship between marginal cost and the slope of total cost (and/or variable cost) curve.
• Define marginal revenue.
• Describe the relationship between marginal revenue and total revenue.
• Define average fixed, variable, and total costs.
• Compare average total (or variable) cost with marginal cost.
• Use calculus to derive the production quantity at which marginal cost equals marginal revenue.
• Recognize that profit maximization (or loss minimization) occurs when marginal cost equals marginal revenue (unless the firm should close immediately).
• Use the definition of limit to connect marginal analysis with derivative functions.
• Determine the amount of profit (or loss) a firm would earn at the point at which marginal cost equals marginal revenue.