|Revenues under Perfect Competition|
|Understanding marginal analysis|
|To find the quantity which maximizes profits, find the value at which the first derivative with respect to quantity is zero:|
d(Profit0/dQ = 0
d(TR-TC)/dQ = 0
d(TR)/dQ - d(TC)/dQ = 0 d(TR)/dQ = d(TC)/dQ
By definition, d(TR)/dQ = MR and d(TC)/dQ = MC
Therefore, the condition for maximum profits is MR=MC.
The second order condition (to ensure this is a maximum, not a minimum, is equivalent to saying that you must be in the range where MC is increasing.
|Short-run Profit-Maximization- Perfect competition|
TFC = 50
How many units of output should the firm produce
|Question 1 Answer|
MR>MC for units 1, 2, 3, 4, 5, 6, but not 7. Therefore produce 6 units unless shutdown is better.
|Question 3 Answer|
|Answer- Question 4|
|Marginal Cost and Supply|
|Real Life Applications|
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