C09-Maximizing Profit
Chapter 9
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| Primary goal of any firm - to earn the most profit possible from the sale of its goods or services. | ||
| Income earned by firms. (Profit = TR - TC) | ||
| π is used to symbolize profit. (π = TR - TC) | ||
| Revenue per unit produced. (AR = TR/Q) NOTE: AR always equals Price. | ||
| The extra revenue earned from producing an extra unit of a good. The change in total revenue divided by the change in quantity. (MR = change TR/change Q) | ||
| Average Revenue | ||
| Marginal Revenue | ||
| The guide by which firms maximize profit (or minimize loss.) | ||
| When a firm faces the certainty of incurring losses, its goal is to incur the lowest loss possible with the production of its goods and services. | ||
| Ceasing operations - the firm's loss minimization occurs at zero output. |