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Unformatted text preview: sell it for. Farmer Brown looks for maximizing output Profit = total revenue – total cost Price optimizing level of output marginal benefit > marginal cost Law of diminishing return proves you can’t feed the world on a flower pot Law of diminishing marginal returns: if equal increments of an input are added, and the quantities of other inputs are held constant the resulting increase in output will decrease beyond some point. The marginal product of the input will diminish When diminishing return sets in, should you stop producing? No …when do you stop expanding, = when marginal revenue equals marginal cost...
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This note was uploaded on 10/02/2011 for the course ECON 200 taught by Professor Cramer during the Spring '07 term at Arizona.
- Spring '07