Overview
Profit maximization is a key concept in economics that focuses on increasing the difference between total revenue and total costs. By understanding how to analyze costs and revenues, businesses can make informed decisions that lead to higher profits. This involves using tools like marginal analysis ...
Key Terms
Example: If a company sells 100 units at $10 each, total revenue is $1,000.
Example: If production costs are $600, total cost is $600.
Example: If producing one more unit increases costs by $5, the marginal cost is $5.
Example: If selling one more unit increases revenue by $8, the marginal revenue is $8.
Example: If total revenue is $1,000 and total costs are $600, profit is $400.
Example: If a company needs to sell 100 units to cover costs, that is the break-even point.