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AP Economics

AP Economics. Mr. Bernstein Module 53: Profit Maximization November 4, 2014. AP Economics Mr. Bernstein. Profit Maximization The goal of a firm is to maximize Economic Profit As output (quantity) rise, both TR and TC rise

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AP Economics

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  1. AP Economics Mr. Bernstein Module 53: Profit Maximization November 4, 2014

  2. AP EconomicsMr. Bernstein Profit Maximization • The goal of a firm is to maximize Economic Profit • As output (quantity) rise, both TR and TC rise • Through Marginal Analysis, firms seek to find the level of output where Economic Profit is maximized

  3. AP EconomicsMr. Bernstein Marginal Analysis • MR = rTR / rQ and • MC = rTC / rQ • Firms will continue to produce if MR > MC and will stop producing when MR = MC • Why? Additional dollars outweighs additional costs • This is called the “Optimal Output Rule” for profit maximization • “Understand this concept, Know this concept, Own this concept”…Professor Reff!!

  4. AP EconomicsMr. Bernstein Profit Maximization Presented Graphically

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