9-1profitmax - Profit Maximization The objective of a...

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Profit Maximization Chapter 9-1 Profit Maximization • The objective of a for-profit firm is to maximize profit. • Profit is total revenue less the costs of the resources (land, labor, capital) used. • Total revenue is the price of goods and services multiplied by the quantity sold, PQ. Profit = PQ – Cost of land, labor and capital Profit-Maximizing Level of Output • The goal of the firm is to maximize profits profits . • Profit is the difference between total revenue and total cost. Total Revenue Total Revenue = Price X Quantity Profit-Maximizing Level of Output • What happens to profit in response to a change in output is determined by marginal revenue ( MR ) and marginal cost ( MC ). • A firm maximizes profit when MC = MR . Profit-Maximizing Level of Output Marginal revenue ( MR ) – the change in total revenue associated with a change in quantity. cost associated with a change in quantity.
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This note was uploaded on 01/01/2011 for the course ECON 101 taught by Professor E during the Spring '10 term at American College of Computer & Information Sciences.

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9-1profitmax - Profit Maximization The objective of a...

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