ECO1A Profit Maximization
Economics1A
3rd Assignment
Presented to:
Prof. Michael T. Noel
Presented by:
Joymie Wilver C. Dayon
January, 2015
1. What is Profit Maximization using TR-TC Approach? Profit Maximization using TR-TC Approach is a method in determining the Profit and the Loss of a certain Company. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue (TR) minus total cost (TC). Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph. (Lipsey, 2011)
Figure 1.Illustration of Profit Maximization using TR-TC Approach.
A method in determining the Profit and the Loss of a certain Company is one of the fundamentals in Economics. The profit-maximizing output is the one at which this difference reaches its maximum. In the accompanying diagram, the linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price. The profit-maximizing output level is represented as the one at which total revenue is the height of C and total cost is the height of B; the maximal profit is measured as CB. This output level is also the one at which the total profit curve is at its maximum. (Lipsey, 2011)
Figure 2. Illustration of Profit Maximization: TR-TC Approach. Therefore, Profit Maximization using TR-TC Approach is one of the fundamentals in Economics.
2.) What is Profit Maximization using MR-MC Approach? Profit Maximization using MR-MC Approach is a method wherein the profit-maximizing quantity of output occurs where MC = MR = P. An alternative perspective relies on the relationship that, for each unit sold, marginal profit (Mπ) equals marginal revenue (MR) minus marginal cost (MC). Then, if marginal revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marginal revenue is less than
3rd Assignment
Presented to:
Prof. Michael T. Noel
Presented by:
Joymie Wilver C. Dayon
January, 2015
1. What is Profit Maximization using TR-TC Approach? Profit Maximization using TR-TC Approach is a method in determining the Profit and the Loss of a certain Company. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue (TR) minus total cost (TC). Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph. (Lipsey, 2011)
Figure 1.Illustration of Profit Maximization using TR-TC Approach.
A method in determining the Profit and the Loss of a certain Company is one of the fundamentals in Economics. The profit-maximizing output is the one at which this difference reaches its maximum. In the accompanying diagram, the linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price. The profit-maximizing output level is represented as the one at which total revenue is the height of C and total cost is the height of B; the maximal profit is measured as CB. This output level is also the one at which the total profit curve is at its maximum. (Lipsey, 2011)
Figure 2. Illustration of Profit Maximization: TR-TC Approach. Therefore, Profit Maximization using TR-TC Approach is one of the fundamentals in Economics.
2.) What is Profit Maximization using MR-MC Approach? Profit Maximization using MR-MC Approach is a method wherein the profit-maximizing quantity of output occurs where MC = MR = P. An alternative perspective relies on the relationship that, for each unit sold, marginal profit (Mπ) equals marginal revenue (MR) minus marginal cost (MC). Then, if marginal revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marginal revenue is less than