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In microeconomics, marginal profit is the increment to profit resulting from a unit or infinitesimal increment to the quantity of a product produced. Under the marginal approach to profit maximization, to maximize profits, a firm should continue to produce a good or service up to the point where marginal profit is zero. At any lesser quantity of output, marginal profit is positive and so profit can be increased by producing a greater amount; likewise, at any quantity of output greater than the one at which marginal profit equals zero, marginal profit is negative and so profit could be made higher by producing less.
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Since profit is revenue minus cost, marginal profit equals marginal revenue minus marginal cost.[1]
References
edit- ^ Hall, Mary (January 10, 2022). "Marginal Revenue and Marginal Cost of Production". Investopedia. DotDash. Retrieved February 9, 2022.