approach to determining the profit maximizing level of output. In this section, we provide an alternative

approach which uses marginal revenue and marginal cost.

Firms often do not have the necessary data they need to draw a complete total cost curve for all levels of

production. They cannot be sure of what total costs would look like if they, say, doubled production or cut

production in half, because they have not tried it. Instead, firms experiment. They produce a slightly greater or

lower quantity and observe how it affects profits. In economic terms, this practical approach to maximizing

profits means examining how changes in production affect marginal revenue and marginal cost.

Figure 8.3 presents the marginal revenue and marginal cost curves based on the total revenue and total cost in

Table 8.1. The marginal revenue curve shows the additional revenue gained from selling one more unit. As
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