How is the increase in profit from renting an additional machine calculated?

The increase in profit from renting an additional machine is calculated by taking the extra revenue generated from the output produced by that machine and subtracting the rental price of the machine. This approach aligns well with the concept of marginal analysis, where one assesses the additional benefits and costs associated with a decision.

When you rent an additional machine, the first step is to determine how much extra output it can produce. The revenue generated from this additional output is the extra revenue. Next, you need to factor in the cost associated with renting that machine, which is its rental price. To find the net benefit or the increase in profit, simply subtract the rental price from the extra revenue. This represents how much additional profit is earned specifically from using that machine.

The other choices do not provide the correct calculation for assessing the increase in profit from an additional machine. For instance, fixed costs are incurred regardless of how many machines you have and do not directly relate to the rental price of a machine or the additional output generated from it. Similarly, total revenue from all machines minus operational costs does not isolate the impact of the marginal machine, and fixed revenue is typically unrelated to the variable output produced by the addition of a rented machine.