Cost And Revenue Curves
Cost and Revenue Curves
J Bara
ECO/533 Economics for Managerial Decision Making
PA04MBA10
April 7, 2005
1. Total profit is the product of profit per unit and the quantity. To maximize profit, quantity is chosen at the point where marginal cost (MR) is equal to marginal revenue (MR) which is where the two graphs intersect. This is the ideal situation to a profit seeking company. Since price is greater than the Average Total Cost (ATC), for each unit sold the profit per unit is simply the value by which the price exceeds the ATC. To maximize profit the firm should continue production in the short run at the quantity where MR=MC. A profit maximizing output means every unit of output represents greater marginal revenue than marginal cost of output. In the case of the State of California in the simulation producing 120,000 units, where MR=MC will result in maximum profit. Any units produced where MC>MR will result in a drop in total revenue......
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Approximate Word Count: 514
Approximate Pages: 3 (250 words per double-spaced page)
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