Revenue and profits Flashcards
What is profit
Total Revenue (TR) β Total
Costs (TC)
What is total costs?
fixed costs + variable costs
What is profit maximisation?
o Profit maximization occurs at the
highest output where Marginal
Revenue = Marginal Cost (MR=MC)
what is average total costs?
π¨π»πͺ = π»πͺ / Q
What is average variable cost?
π¨π½πͺ = π½πͺ / Q
what is average fixed cost?
π¨ππͺ = ππͺ / Q
what is marginal cost?
π΄πͺ =π«π»πͺ/ π«πΈ = π π»πͺ/π Q
What is total revenue with price?
π»πΉ = π· πΈπ Γ πΈπ = π· Γ Q
what is average revenue (price)
π¨πΉ = π»πΉ/πΈ = π· Γ πΈ/πΈ = π· (πΈd)
What is marginal revenue?
π΄πΉ = π«π»πΉ/ π«πΈ = π π»πΉ/π Q
What is economic profit equation?
- π¬πππππππ π·πππππ = π = π(πΈ) = π»πΉ β π»πͺ = π· β πΈ β (π¨πͺ β πΈ)
- Also, since π = π(π), then for profit to be at its highest,
the condition has to be met that
π π/ ππ = 0 - And π π/ ππ = π ππ / ππ - π ππΆ/ππ = ππ β ππΆ = 0
What does MR-MC = 0 mean?
- Since then ππ
β ππΆ = 0, it means to maximise profit it has to be that
ππ π = ππΆ(π) - Implying that quantity π has to be the amount for which
ππ = ππΆ!
Another equation for economic profit?
- π¬πππππππ π·πππππ = π
πππ = πΈβ Γ [π·
β β π¨πͺβ] - Where πΈβ =Quantity for which ππΆ = ππ ,
- Where π·β = Price for which ππΆ = ππ , and
- Where π¨πͺβ = Average cost for which ππΆ = πR
