MGEA02H3 Lecture Notes - Lecture 15: Average Variable Cost, Marginal Revenue, Profit Maximization
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11 Nov 2017
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Mgea02h3 lecture 15 perfect competition scenarios. Lecture 15 will also cover chapter 12 of the microeconomics textbook. Profit maximization the short run or long run process by which a firm determines the price and output level that will result in the largest profit. Firms will produce up until the point that marginal cost equals marginal revenue. This strategy is based on the fact that the total profit reaches its maximum point where marginal revenue equals marginal profit. This is the case because the firm will continue to produce until marginal profit is equal to zero, and marginal profit = the marginal revenue the marginal cost. A firm will implement a production shutdown if the revenue from the sale of goods produced cannot cover the variable costs of production. In this situation, a firm will lose more money when it produces goods than if it does not produce goods at all.
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