Profits for Competitive and Monopolistic Firm4

# Profits for Competitive and Monopolistic Firm4 - Profits...

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Profits for Competitive and Monopolistic Firms Profit In the unit on supply, we established that sellers derive their utility from profits, or the amount of money that they actually make from a sale. Roughly speaking, this means that when the price of a good goes up, the seller will be happier, but there is more to profit than the sale price of a good. For instance, we would think that Kenny, who sells shirts, would be happier if the selling price went from \$20 a shirt to \$25 a shirt. If nothing else changes, then that's true: he will be happier at the higher price. If with the higher sale price his costs change, however, from an initial cost of \$10 a shirt to a cost of \$17 a shirt, then he would have been happier at the lower price, since his profits now are actually decreased. Profit = Total Revenue (TR) - Total Cost (TC) Kenny's initial profit per shirt is: Profit = 20 - 10 = \$10 a shirt After the change in both selling price and costs, however, his new profit per shirt is: Profit = 25 - 17 = \$8 a shirt

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## This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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Profits for Competitive and Monopolistic Firm4 - Profits...

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