ECON 2310 Chapter Notes - Chapter 9: Marginal Revenue

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9. 1 profit-maximizing quantities: profit = revenue - cost. Firm needs to find quantity or price that results in the largest possible profit. In very competitive industries, a firm that doesn"t maximize profit will simply fail to survive. Products demand function states how many units buyers will demand at each price. Inverse demand function: for a firms" product, describes how much firm must charge to sell any given quantity of its product. When output is finely divisible, we can find a firm"s profit maximization sales quantity by graphing its revenue. Profit maximizing quantity is located where the vertical distance between revenue and cost curve s is greatest. 9. 2 marginal revenue, marginal cost, & profit maximization. Benefit is revenue, so firms marginal benefit = marginal revenue. Inframarginal units: the units the firm sells other than the change q marginal units. Best choice must satisfy the no marginal improvement principle.

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