The goal for any business
The goal for any business, company, or firm, is to make a profit, while keeping their production costs as low as possible. The balance in finding what will make that business competitively successful and financially manageable, economically speaking, comes down to marginal cost (MC) and marginal revenue (MR). Only when the marginal revenue and marginal cost are equal and one does not exceed or fall below the other, can the profit of any given company be at its best.
Marginal cost (MC), an additional cost or profit when another unit is produced, is significant in keeping the marginal revenue equal to each other (MR). Marginal revenue is what the firm or business will receive when that additional product goes to output. A business should always consider the outcome when production changes, even by just one unit. Additional costs are expected but the revenue that the company receives from that extra unit in production, should cause the curves to intersect, making the marginal cost and marginal revenue, equal (MR=MC). The benefit to the company or business when the marginal revenue and marginal cost equal is that during this time, the company is making a profit and not losing any money.
The contrast to the cost and revenue being equal could be devastating to a company’s production, where marginal costs exceed marginal revenue. If a company produces one additional unit of product and the output cost the business in revenue, then measures should be taken immediately to stop the production of the unit because it does not profit the company and will lose money. It will take more money than the company has to once again bring production and output back to an equal MR=MC.
Another scenario could also be that the marginal revenue exceeds the marginal costs. If a unit is in production and the revenue that comes in for that product is unusually high, it could be profitable for the business to consider producing additional units. However, this process should be monitored closely and make sure that production is constant. The goal should be for the company to bring the marginal costs and marginal revenue back to an equal point so that their costs and profit are maximized.