ECON 600 Lecture 3: Profit Maximization I. The Concept of Profit Maximization Profit is defined as total revenue minus total cost. Π = TR – TC (We use Π to stand for profit because we use P for something else: price.) Total revenue simply means the total amount of money that the firm receives from sales of its product or other sources. Total cost means the cost of all factors of production. But – and this is crucial – we have to think in terms of opportunity cost, not just explicit monetary
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and capital goods applied to production * Resources: Land, Labor, Capital, Entrepreneurship and management skills 3. Scarcity and opportunity cost * Scarcity is the condition in which resources are not available to satisfy all needs and wants of a specified group or people. * Opportunity cost is the amount (or subjective value) that must be scarified (given up) in choosing one activity over the next best activity. * Which of the following is the best example of opportunity cost
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Section 1 social science a science (the pursuit of systematic and formulated knowledge) that is applied to human behaviour economics the study of how people use their limited resources in an attempt to satisfy unlimited wants microeconomics the economics of individual parts or sectors of a national economy macroeconomics the study of features of national economies growth an increase the quantity that an economy is able to produce development an improvement in the living standards of the average
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the market price. Thus the elasticity of demand is perfectly elastic (a change in price will result in a change in quantity demanded) and a horizontal line will form the demand curve. If a supplier raises their price 2 cents above the market price no one will buy their stock as there there are many other suppliers selling for 2 cents less. They also have no motivation to sell for less. Thus they can sell as much as they want for this price. Now because the elasticity of demand is so high there
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Question 1. How does the theory of the firm provide an integrated framework for the analysis of managerial decision making across the functional areas of business? Discuss. Answer. Contribution of theories of the firm to the concept of the business model The advantage of the Chesbrough and Rosenbloom approach to the business model concept is that its functions or components provide a comprehensive structure by which to analyse different sources of value in firms. Compared for instance with Amit
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bring us a better point of view, of what Costco wants to do in Puerto Rico. Costco is a retail store; he formed his business at his house and wants to expand his company by the use of his invention. This invention gives the opportunity of enjoy reading books in a whole new way to some population sectors. He is digitalizing books but in addition he has created new tools and strategies for them to use while using his product. Basically, Carlos wants to have an excellent business approach, free time
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Introduction The chosen organisation for the purpose of this assignment is the England and Wales Cricket Board (hereafter ECB). The ECB is the governing body of cricket in both England and Wales and was created on the 1st January 1997, replacing the National Cricket Association and the Test and County Cricket Board. It has increasingly turned to commercial revenue generation to support its activities and raises revenue from the proceeds of broadcasting, sponsorship, the sale of merchandise and
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Case study 1.1 What did that really cost you? Economists measure costs using a concept called opportunity cost. The opportunity cost of an action is the resources used when that action is taken valued in their next best alternative use. It is the problem of scarcity that explains why economists think opportunity cost is the appropriate measure of cost. Scarcity of resources implies that the real cost of an action to society is the resources that are used when that action is taken. Therefore, to
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Name Date Instructor Introduction When one dreams of opening a successful business, they hope to create one that is profitable, yet fair in the market place in which they compete. Every businessperson wants his or her company to be the best and wants to create an empire that surpasses all expectations. Unfortunately, they eliminate all competitors seeking their own success. One such company is the mega-retailer, Wal-Mart. Market Structure The monopolistic structure
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| Assignment 3 | Pricing Strategies for In elasticity Usually corporations use the price elasticity of demand for goods and services to decide or choose pricing policies. Cost elasticity point to the sensitivity of clientele to the fluctuation in pricing, this then affects the volume sold, revenues and earnings. The best pricing policies make the most of earnings by charging precisely what the marketplace will allow. Director will possibly modify their pricing plan depending on changes
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