8.c. The Calculus of Profit-Maximization by a Competitive Firm Any profit-maximizing firm chooses inputs and outputs to maximize economic profits. By definition, maximization of economic profits entails maximization of the difference between the firm's total revenue and its total cost. • A firm's total revenue is defined as the quantity, Q, sold at a price, P(q): TR(q) = P(q) ∙ Q • A firm's total costs are defined as the quantity of capital, K, used multiplied
Words: 949 - Pages: 4
EXAM IN PROFIT MAXIMIZATION AND LOSS MINIMIZATION MONSOUR A. PELMIN Problems 1. MONSOUR PELMIN SPORTS CORP. produces golf balls and can sell them for Php.15 each. The output, price, average revenue, Marginal revenue, marginal cost, average variable cost, and average total cost are shown in the table below. a. Fill in the values for average revenue and marginal revenue in the table above. b. On the axes provided below, plot the marginal revenue and the average total, average variable
Words: 322 - Pages: 2
by a company in profit maximization. By factoring, analyzing and comparing the various data on revenue and cost, a company can use a marginal analysis to determine the best direction to maximize profits. A marginal analysis is the “comparisons of marginal benefits and marginal costs, usually for decision making” (McConnell, 2011, p. 6). A. There are two methods to describe profit maximization. Further details of both methods and how each are used to determine profit maximization are as followed:
Words: 863 - Pages: 4
monopolistic competitive market scenario, profit maximization can be arrived by working the numbers in two separate approaches. The first is Total Revenue to Total Cost and profit maximization is derived by taking the total revenue and subtracting the total cost at each quantity level. Profit maximization is at the point where the gap is the largest between TR and TC. The second approach is Marginal Revenue to Marginal Cost. In this approach profit maximization is obtained by determining where MR is
Words: 580 - Pages: 3
revenue total cost approach to determine the profit maximizing output you will start by recognizing that profit is equal to total revenue minus total cost. The profit –maximizing output is the output at which profit reaches it maximum. In the TR TC approach the profit maximization is the quanity of output that achieves the greatest difference between TR and TC. The price of the good is set because all of the competing companies are price takers. Marginal profit is equal to marginal revenue minus marginal
Words: 472 - Pages: 2
Profit Maximization and Corporate Social Responsibility Over the past few decades’ American companies have been obsessed with maximizing profits. This obsession has resulted in big businesses having some of the highest profit margins in history. To shareholders, this news couldn’t be better. But many times these high profit margins have come with a great price, and it is not the businesses that are paying for it. Milton Friedman’s famous article The Social Responsibility of Business is to Increase
Words: 455 - Pages: 2
Profit maximization is how a company determines the price and the quantity of units produced in order to return the highest profits. Two methods of determining the highest profits are by the Total Revenue-Total Cost method and the Marginal Revenue-Marginal Cost method. A1. In the Total Revenue-Total Cost method, the profit is equal to the total revenue less the total cost. When given a table of revenues and costs such as the table in this case, the profit maximization point in this method is
Words: 491 - Pages: 2
0005Q² MC=$5+0.001Q Question C: Profit Maximization MR = MC 60-5 = 0.001Q+0.01Q 55 = 0.001Q Q = 55/0.011 Q = 5000 P = 60- 0.005 (5000) P = 60 - 25 P = $35 TR = Q X P TR = 5000 - 35 TR = $175,000 TC = 100 000 + (5 X 5000) + (0.0005 X 5000²) TC = $137,500 π = TR - TC = $175 000 - 137 500 = $37,500 The profit is maximized when Marginal Cost is the same as Marginal Revenue, and the Marginal Profit is equal to zero. The profit is at the maximum level of RM37
Words: 319 - Pages: 2
exactly what the cost of the last unit would be, but it’s not hard to find the average cost. To find this you would take the change in costs from a previous level divided by the change in quantity (MC=change in TC/change in q.) (Marginal cost, 2011) Profit is
Words: 880 - Pages: 4
is a success are cost, revenue and profit. Revenue can high for a company, but if the costs are high as well a profit won’t show and they will most likely not be able to make it. It’s important for businesses to keep track of their profits and cost’s. The way businesses figure their profit maximization is by determining the price and the number of widgets made to get the highest profit they can for their business. There are two ways of figuring your highest profits, one of which is by Total Revenue/Total
Words: 522 - Pages: 3
