A single economic concept Essay Example | Topics and Well Written Essays - 500 words

A single economic concept - Essay Example The process aims at identifying the costs that the company can reduce in the long run or ways that the company can increase its revenues in the long run which can marginally increase the element of profit for it for a given level of output or even by increasing the level of output. (Investorwords) Whichever cost is sustained by a company can be grouped into two categories which are variable costs and fixed costs. Variable costs change with the increase in the output while the fixed costs are sustained by the entity stay the same whatever be the output, which also includes zero output. When the company has attained the point where its total costs have equaled the total revenue, it has reached the point of break even and each additional product of the company will generate pure profit for which only the variable costs will be charged and the fixed cost will be spared as the breakeven has already covered them so an increase in the level of output can aid in the profitability of the company with greater margin of profit. For each unit sold or service offered, the marginal profit of the company is the difference of the revenue and the cost of that particular product. If the revenue for a unit of product is greater than the unit cost of that product then the profit for the unit is positive and vice