Search results
Results From The WOW.Com Content Network
Profit maximization using the total revenue and total cost curves of a perfect competitor. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue minus total cost (). Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph.
In a single-goods case, a positive economic profit happens when the firm's average cost is less than the price of the product or service at the profit-maximizing output. The economic profit is equal to the quantity of output multiplied by the difference between the average cost and the price.
Profit margin can also help you compare your company’s performance with that of your competitors, though the ideal percentage will vary based on your industry. For example, margins are typically ...
The PI is a financial tool that helps investors assess the potential profitability of a project or investment. It’s calculated by dividing the present value of expected future cash flows by the ...
Another significant factor for profit maximization is market fractionation. A company may sell goods in several regions or in several countries. Profit is maximized by treating each location as a separate market. [21] Rather than matching supply and demand for the entire company the matching is done within each market.
As a result, if the firm is maximizing profit, the elasticity of demand facing it can never be less than one in magnitude (|E|<1). If it were, the firm could increase its profits by raising its price, because inelastic demand means that a price increase of 1% would reduce quantity by less than 1%, so revenue would rise, and since lower quantity ...
C. Robert Taylor points out that the accuracy of Hotelling's lemma is dependent on the firm maximizing profits, meaning that it is producing profit maximizing output and cost minimizing input . If a firm is not producing at these optima, then Hotelling's lemma would not hold. [2]
Competitive equilibrium is a concept in which profit-maximizing producers and utility-maximizing consumers in competitive markets with freely determined prices arrive at an equilibrium price. At this equilibrium price, the quantity supplied is equal to the quantity demanded. [ 19 ]