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ECON 2310 (47)
Chapter 9

Chapter 9 Intermediate Micro Notes

2 Pages
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Department
Economics
Course Code
ECON 2310
Professor
Johanna Goertz

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Description
Chapter 9 EconomicsProfit Maximization91 ProfitMaximizing QuantitiesProfitRevenueCost Firm needs to find quantity or price thatresults in the largest possible profitIn very competitive industries a firm that doesnt maximize profit will simply fail to survive Products demand function states how many units buyers will demand at each priceInverse Demand Function for a firms product describes how much firm must charge to sell any given quantity of its product Maximizing ProfitsProfitRevenue Q X QuantityProfitsPQ X QCQ When output is finely divisible we can find a firms profit maximization sales quantity by graphing its revenuecost curvesProfit maximizing quantity is located where the vertical distance between revenue and cost curve s is greatest92 Marginal Revenue Marginal CostProfit Maximization Benefit is revenue so firms marginal benefitMarginal revenueMRChange R Change QInframarginal Units The units the firm sells other than the change Q marginal unitsThe ProfitMaximizing Sales Quantity Best choice must satisfy the No Marginal Improvement Principle Says that no marginal increasedecrease in the choice can produce an increase in net benefit Therefore MBMC at an interior best choice If MBMC best to increase action a little bit If MBMC best to decrease action a little bitTo find best choice1 Identify any interior actions at which MCMB If more than 1 interior action satisfies MBMCdetermine which produces the high
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