190 07-11 Profit Maximization in the Short Run C(q) Cost, Revenue, Profit $(per year) Total Cost Slope of C(g)=MC Why is cost positive when g is zero? 0 Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-11 0 Cost, Revenue, Profit $ (per year) Output (units per year) Profit Maximization in the Short Run C(q) Total Cost Slope of C(q) = MC Why is cost positive when q is zero?
07-12 0 Marginal Revenue,Marginal Cost, and Profit Maximization Marginal revenue is the additional revenue from producing one more unit of output. Marginal cost is the additional cost from producing one more unit of output. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-12 • Marginal revenue is the additional revenue from producing one more unit of output. • Marginal cost is the additional cost from producing one more unit of output. Marginal Revenue, Marginal Cost, and Profit Maximization
190 07-13 纯 Marginal Revenue,Marginal Cost, and Profit Maximization Comparing R(q)and C(g) Output levels:0-go: Cost, Revenue, ·Cq>Rqd Profit ($s per year) C(q) -Negative profit A R(q) ·FC+VC>R(q) ·MR>MC B -Indicates higher profit at higher output 00 π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-13 • Comparing R(q) and C(q) – Output levels: 0- q0: • C(q)> R(q) – Negative profit • FC + VC > R(q) • MR > MC – Indicates higher profit at higher output 0 Cost, Revenue, Profit ($s per year) Output (units per year) R(q) C(q) A B q0 q * (q) Marginal Revenue, Marginal Cost, and Profit Maximization
07-14 0 Marginal Revenue,Marginal Cost, and Profit Maximization Comparing R(g)and C(q) Question:Why is profit negative Cost, Revenue, when output is zero? Profit $(per year) c(q) R(q) B 9 π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-14 • Comparing R(q) and C(q) – Question: Why is profit negative when output is zero? Marginal Revenue, Marginal Cost, and Profit Maximization R(q) 0 Cost, Revenue, Profit $ (per year) Output (units per year) C(q) A B q0 q * (q)
190 07-15 Marginal Revenue,Marginal Cost, and Profit Maximization Comparing R(g)and C(g) - Output levels:go-g" Cost, Revenue, ·R(q>C(q Profit $(per year) C(q) ·MR>MC A R(q) -Indicates higher profit at higher output Profit is increasing B 00 d π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-15 • Comparing R(q) and C(q) – Output levels: q0 - q* • R(q)> C(q) • MR > MC – Indicates higher profit at higher output – Profit is increasing R(q) 0 Cost, Revenue, Profit $ (per year) Output (units per year) C(q) A B q0 q * (q) Marginal Revenue, Marginal Cost, and Profit Maximization