Economics Essay

309.1.1-05, 06

Business owners, managers, and aspiring entrepreneurs need to know the best form of business organization to select, based on various considerations: taxes, liability, capital contributions, sharing of profits and losses, management and control, and survivorship.   There are ways for business owners and entrepreneurs to measure these various considerations to make decisions affecting their business and business profits.
For a business owner or manager to know the best form of business they most know the relationship between Marginal Revenue and the Total Revenue.   Marginal Revenue is the additional revenue generated by increasing the quantity of sales by a unit of one.   Total Revenue is simply the measure of the price per unit sold multiplied by the quantity of the product.   As a firm produces more units the price must go down to increase the quantity sold which creates a curve.   As Marginal Revenue decreases, Total Revenue will increase, as the marginal revenue approaches zero the total revenue quantity produced will begin to plateau.   As marginal revenue dips below zero on the curve, the total revenue will decline as well.   The relationship between Marginal Revenue and Total Revenue can help a Company determine how far the price can go down, to increase the quantity of product sold, before it no longer makes sense to lower the price any further.   The point where it is no longer viable to lower the price to increase quantity is when Marginal Revenue equals zero.  
Marginal cost is the expense created by manufacturing one more unit of a product.   Total cost is fixed and variable costs associated with the manufacturing of a product.   In many industries the fixed cost associated with making the product is often high.   However when marginal costs are factored in the cost per unit is lower.   This is because fixed cost can be spread out over each unit of production, lowering the cost on each unit produced.   Like marginal revenue and total revenue,...