Marginal profit

The marginal profit describes the profit that can be expected for an additional (infinitely small) manufactured product unit.
The marginal profit is calculated using the following derived profit function:

f (x) = sales function - cost function

Any conceivable production quantity for the value x can be inserted into the function of the marginal profit and one always receives the additional profit to be calculated at a corresponding level of production.

Importance of marginal profit

With the help of the marginal profit, a product calculation can be carried out. Such an investigation can provide information about how large the quantity of product units sold must be in order for the break-even point to be reached. Marginal profit can also help determine the output and price of companies.

Summary

  • Marginal profit describes the profit that can be expected for an additional quantity of a product produced
  • Profit function: f (x) = sales function - cost function
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