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- 1. Group 6: III-ACSAD Reported By: Arias, Kristine De Jesus, Relly
- 3. Total Cost The cost of all factors of production. Total Revenue The total amount of money that the firm receives from sales of its product or other sources.
- 8. A monopolist maximizes profit by choosing a quantity where marginal revenue equals marginal cost A process that companies undergo to determine the best output and price levels in order to maximize its return. <ul><li>Total Revenue – Total cost Method </li></ul><ul><li>Marginal Revenue – Marginal Cost Method </li></ul>
- 10. (This is complicated but very useful to compare profit maximization under different market condition) Stage1: To find profit maximizing output, we use MC & MR curves. To maximize profit Marginal Revenue must be equal to Marginal Cost. i.e. MR=MC Why profit maximize when MR=MC? To find out the answer to this question, observe when MR=/= (not equal to) MC. MC MR 1 3 2 5 3 10 4
- 11. <ul><li>PROFIT = TR-TC </li></ul><ul><li>Total Revenue (TR): This is the total income a firm receives. </li></ul><ul><li>Total cost : refers to the total expense incurred in reaching a particular level of output; if such total cost is divided by the quantity produced, average or unit cost is obtained. </li></ul><ul><li>MARGINAL REVENUE:IS THE CHANGE IN REVENUE WHICH COMES FROM SELLING AN ADDITIONAL UNIT OF OUTPUT. </li></ul><ul><li>MARGINAL COST:IS THE CHANGE IN COST WHICH COMES FROM PRODUCING AN ADDITIONAL UNIT OF OUTPUT. </li></ul>
- 12. <ul><li>AC AND AR ARE THE AVERAGE COST AND REVENUE COST CURVES. </li></ul><ul><li>MC IS THE MARGINAL COST AND MARGINAL REVENUE. </li></ul><ul><li>WHEN OUTPUT REACHES OM,MARGINAL REVENUE EQUALS MARGINAL COST AT E. </li></ul><ul><li>HENCE PQRS IS THE PROFIT. </li></ul><ul><li>BEYOND OM OUTPUT ,THE MC CURVE IS HIGHER THAN MR CURVE WHICH INDICATES LOSSES. </li></ul><ul><li>THUS PROFITS ARE MAXIMUM WHEN MR=MC. </li></ul>

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