Explain the rules for finding maximum profit using total revenue and total cost and marginal revenue and marginal cost.
What will be an ideal response?
Maximum profit is where total revenue exceeds total cost by the maximum amount. If the firm were to increase output beyond this point, the addition to TC ? MC would exceed the addition to TR ? MR. So the firm should stop once MC catches up to MR. That is, to maximize profit, stop at the output where MR = MC.
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Firms in monopolistic competition compete by selling similar, but not identical products
Indicate whether the statement is true or false
Behavioral economics can best be described as
A) the study of situations in which people's choices do not appear to be economically rational. B) the study of human economic behavior. C) the basis for efficient markets. D) the study of how the economy affects human behavior.
Which of the following statements is not correct?
a. The percentage of the population that suffers from long-term poverty is far smaller than the percentage of the population that suffers from short-term poverty because there is a high level of economic mobility in the United States. b. Permanent income is a better measure of a family's ability to buy the necessities of life than is transitory income. c. The economic life cycle theory explains why gifts of goods and services reduce poverty for the very young and the very old. d. Because people can borrow and save to smooth out changes in income, their standard of living in any one year depends more on lifetime income than on a particular year's income.
If the absolute value of the price elasticity of demand for tickets to a football game is 2, then if the price increases by 1 percent, quantity demanded decreases by:
A. 4 percent. B. 0.5 percent. C. 1 percent. D. 2 percent.