A firm's total revenue is the total income generated from selling goods or services, while total cost represents the expenses incurred in the production process. Profit is calculated as the difference between total revenue and total cost. Therefore, if total revenue exceeds total cost, the firm earns a profit; if total cost exceeds total revenue, the firm incurs a loss. This relationship highlights the importance of managing costs and maximizing revenue to achieve profitability.
When Marginal Cost is below Marginal Revenue, profit is increasing. When Marginal Cost is above Marginal Revenue, profit is decreasing. Since the goal of firms is to maximise profit, they should produce at a level where the MR of producing another unit is equal to the Marginal Cost of producing another unit. Firms should keep producing until this point because there is a hidden profit in MC. This is because we are not taking into account the Accounting profit.
why do firm stay in business if profit is=0In economic profit is revenue minus all costs,including implicit costs,like the opportunity cost of the owner's time and money.In the zero profit equilibrium,firms earn enough revenue to cover these costs.by Abdul hanan tareen
The TR-TC approach to profit maximization involves analyzing total revenue (TR) and total cost (TC) to determine the most profitable level of output. Profit is maximized when the difference between total revenue and total cost is the largest, which occurs where marginal revenue equals marginal cost (MR = MC). This approach helps firms identify the optimal production level that maximizes profitability by balancing revenue generation with cost management.
1) Profit maximisation.The standard assumption made by economist is that firm will seek to maximise their profit that is maximise the gap between the firm's total revenue and total cost (including normal profit.) A firm making the minimum level of normal profit is said to be producing the break even output. Firms will want to make abnormal profit as a reward for managing the resources and taking business risks.2) Sales revenue maximisation A firm may be prepared to accept a lower price and produce above the profit maximising output in order to increase its market share in a growing market. This is a penetration pricing policy.A firm choose to maximise its sales revenue would raise output beyond MC=MR until MR had fallen to zero. Extra sales after this would contribute nothing to total revenue, therefore it is at maximum.
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
Profit
When Marginal Cost is below Marginal Revenue, profit is increasing. When Marginal Cost is above Marginal Revenue, profit is decreasing. Since the goal of firms is to maximise profit, they should produce at a level where the MR of producing another unit is equal to the Marginal Cost of producing another unit. Firms should keep producing until this point because there is a hidden profit in MC. This is because we are not taking into account the Accounting profit.
why do firm stay in business if profit is=0In economic profit is revenue minus all costs,including implicit costs,like the opportunity cost of the owner's time and money.In the zero profit equilibrium,firms earn enough revenue to cover these costs.by Abdul hanan tareen
To increase profit the firm will decrease output to a point where MC=MR. This is the Profit Maximisation point
The TR-TC approach to profit maximization involves analyzing total revenue (TR) and total cost (TC) to determine the most profitable level of output. Profit is maximized when the difference between total revenue and total cost is the largest, which occurs where marginal revenue equals marginal cost (MR = MC). This approach helps firms identify the optimal production level that maximizes profitability by balancing revenue generation with cost management.
1) Profit maximisation.The standard assumption made by economist is that firm will seek to maximise their profit that is maximise the gap between the firm's total revenue and total cost (including normal profit.) A firm making the minimum level of normal profit is said to be producing the break even output. Firms will want to make abnormal profit as a reward for managing the resources and taking business risks.2) Sales revenue maximisation A firm may be prepared to accept a lower price and produce above the profit maximising output in order to increase its market share in a growing market. This is a penetration pricing policy.A firm choose to maximise its sales revenue would raise output beyond MC=MR until MR had fallen to zero. Extra sales after this would contribute nothing to total revenue, therefore it is at maximum.
5000dollor revenue in portugal
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
At this intersection point on a graph, firms will earn maximum profit, even if this point is under average total cost.
Trading firms are businesses that buy goods which will be resold to its buyers. Trading firms usually have inventories of goods to be resold. Service firms do not have these inventories. Service firms derive their revenue from services which they provide to customers. For example, the revenue of accounting firms relate to fees from conducting audits in organizations. For income statement of service firms, revenue from these services is reported as fees earned (or service revenue). Net operating revenue for service firms is the difference between the fees earned and the operating expense involved in offering the services. If you are interested in trading or you need trading services I suggest you to look at 5markets.com It offers trading services in currencies, commodities and indices, highly competitive trading conditions and superior customer support.
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