07-16 Marginal Revenue,Marginal Cost, and Profit Maximization Comparing R(q)and C(g) Output level:g* Cost, Revenue, ·Rq=C(q Profit $(per year) C(q) ·MR=MC A R(q) ·Profit is maximized B 00 d π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-16 • Comparing R(q) and C(q) – Output level: q* • R(q)= C(q) • MR = MC • Profit is maximized 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
07-17 490 Marginal Revenue,Marginal Cost, and Profit Maximization Comparing R(g)and C(q) Output levels beyond g": Cost, Revenue, ·R(q>Cq Profit $(per year) C(q) ·MC>MR A R(q) ·Profit is decreasing B 00 d π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-17 • Comparing R(q) and C(q) – Output levels beyond q*: • R(q)> C(q) • MC > MR • Profit is decreasing 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)
07-18 0 Marginal Revenue,Marginal Cost, and Profit Maximization Therefore,it can be said: Cost, Profits are maximized when Revenue, Profit MC=MR. $(per year) C(q) A R(q) B 0 d π(q) Output(units per year) Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-18 • Therefore, it can be said: – Profits are maximized when MC = MR. 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)
1907 07-19 Marginal Revenue,Marginal Cost, and Profit Maximization △R MR 0= △q 元=TR-TC △C MC= △q Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-19 Marginal Revenue, Marginal Cost, and Profit Maximization q R MR q C MC π = TR - TC
490 07-20 ④ Marginal Revenue,Marginal Cost, and Profit Maximization ·The Competitive Firm -Price taker Market output(O)and firm output(g) -Market demand (D)and firm demand (d) -R(g)is a straight line Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 07-20 • The Competitive Firm – Price taker – Market output (Q) and firm output (q) – Market demand (D) and firm demand (d) – R(q) is a straight line Marginal Revenue, Marginal Cost, and Profit Maximization