09GottProfitMaxShow

09GottProfitMaxShow - Maximizing Profit Include Revenue...

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1 Maximizing Profit Include Revenue Profit maximization Loss minimization MR = MC rule
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2 Profit Maximization The primary goal of a firm: maximize profit. Profit : total revenue minus total costs (includes implicit costs)
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3 EXHIBIT 1 AVERAGE TOTAL COST AND MARGINAL COST OF PRODUCING FISH PER FISHING RUN ($ PER FISH) [numbers from ch. 8, Exh. 6A] If 11,000 fish are for sale at a price of $0.75 , what is the profit per fish? What is total profit? Total profit: (P - ATC) * Q Total profit = (0.75 – 0.68) * 11,000 = $770 How determine maximum profit?
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4 MR = MC Rule Two ways to find the most profitable level of production: Calculate total profit for each output level. Or, does last unit produced add to or subtract from total profit.
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5 EXHIBIT 2A TOTAL AND MARGINAL REVENUE CURVES DERIVED FROM SELLING FISH WHEN P = $0.90
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6 EXHIBIT 2C TOTAL AND MARGINAL REVENUE CURVES DERIVED FROM SELLING FISH WHEN P = $0.90 [ Assumption of perfect competition.]
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MR = MC Rule Guideline for profit maximization in neoclassical theory. If MR > MC,
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09GottProfitMaxShow - Maximizing Profit Include Revenue...

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