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AP Economics. Mr. Bernstein Module 53: Profit Maximization November 5, 2013. AP Economics Mr. Bernstein. Profit Maximization The goal of a firm is to maximize Economic Profit As output (quantity) rise, both TR and TC rise

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Ap economics

AP Economics

Mr. Bernstein

Module 53:

Profit Maximization

November 5, 2013


Ap economics mr bernstein

AP EconomicsMr. Bernstein

Profit Maximization

  • The goal of a firm is to maximize Economic Profit

  • As output (quantity) rise, both TR and TC rise

  • Through Marginal Analysis, firms seek to find the level of output where Economic Profit is maximized


Ap economics mr bernstein1

AP EconomicsMr. Bernstein

Marginal Analysis

  • MR = rTR / rQ and

  • MC = rTC / rQ

  • Firms will continue to produce if MR > MC and will stop producing when MR = MC

  • Why? Additional dollars outweighs additional costs

  • This is called the “Optimal Output Rule” for profit maximization

  • “Understand this concept, Know this concept, Own this concept”…Professor Reff!!


Ap economics mr bernstein2

AP EconomicsMr. Bernstein

Profit Maximization Presented Graphically


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