Profit Ion
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Profit Maximisation
Profit maximisation
Using total cost and revenue curves (a) Price taking firm
Profit maximisation
Using total cost and revenue curves (b) Firm facing downward sloping demand curve
Finding maximum profit using total curves 24
TR, TC, TΠ (£)
20 16 12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves 24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves TC
24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves TC
24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1
2
3
4
5
6
-4 -8
TΠ
7
Quantity
Finding maximum profit using total curves TC
24
b
TR, TC, TΠ (£)
20 16
TR
a
12 8 4
c
0 1
d 2
3
4
5
6
-4 -8
TΠ
7
Quantity
TR, TC, TΠ (£)
Finding maximum profit using total curves 24 22 20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8
TC d
TR
e
f
1
2
3
4
5
6
TΠ
7
Quantity
Profit maximisation
Using average and marginal cost and revenue curves (a) Price taking firm
Price-taking firm
Costs and Revenue (£)
MC 50
40
38
a
AR = MR
AC
Total profit = £16 x 40 = £640
30
b
22
20
10
0 0
10
20
30
40
50
60
Quantity
Profit maximisation
Using average and marginal cost and revenue curves (b) Firm facing downward sloping demand curve
Finding the profit-maximising output using marginal curves 16
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
Quantity
Finding the profit-maximising output using marginal curves 16 MC
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
Quantity
Finding the profit-maximising output using marginal curves 16 MC
Costs and revenue (£)
12
8
4
Profit-maximising output
e
0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC
Costs and revenue (£)
12
8
4
AR 0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC Total profit = £1.50 x 3 = £4.50
Costs and revenue (£)
12
AC
8
a
6.00 TOTAL PROFIT b 4.50 4
AR 0 1 -4
2
3
4
5
6
7
MR
Quantity
Profit maximisation
Loss minimising
Loss-minimising output MC
Costs and revenue (£)
AC
AC
LOSS AR
AR O
Q
MR
Quantity
Profit maximisation
Short-run shut-down point
Costs and revenue (£)
The short-run shut-down point
AC AVC
P= AVC
AR O
Q Quantity
Profit maximisation
Using total cost and revenue curves (a) Price taking firm
Profit maximisation
Using total cost and revenue curves (b) Firm facing downward sloping demand curve
Finding maximum profit using total curves 24
TR, TC, TΠ (£)
20 16 12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves 24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves TC
24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1 -4 -8
2
3
4
5
6
7
Quantity
Finding maximum profit using total curves TC
24
TR, TC, TΠ (£)
20 16
TR
12 8 4 0 1
2
3
4
5
6
-4 -8
TΠ
7
Quantity
Finding maximum profit using total curves TC
24
b
TR, TC, TΠ (£)
20 16
TR
a
12 8 4
c
0 1
d 2
3
4
5
6
-4 -8
TΠ
7
Quantity
TR, TC, TΠ (£)
Finding maximum profit using total curves 24 22 20 18 16 14 12 10 8 6 4 2 0 -2 -4 -6 -8
TC d
TR
e
f
1
2
3
4
5
6
TΠ
7
Quantity
Profit maximisation
Using average and marginal cost and revenue curves (a) Price taking firm
Price-taking firm
Costs and Revenue (£)
MC 50
40
38
a
AR = MR
AC
Total profit = £16 x 40 = £640
30
b
22
20
10
0 0
10
20
30
40
50
60
Quantity
Profit maximisation
Using average and marginal cost and revenue curves (b) Firm facing downward sloping demand curve
Finding the profit-maximising output using marginal curves 16
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
Quantity
Finding the profit-maximising output using marginal curves 16 MC
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
Quantity
Finding the profit-maximising output using marginal curves 16 MC
Costs and revenue (£)
12
8
4
Profit-maximising output
e
0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC
Costs and revenue (£)
12
8
4
0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC
Costs and revenue (£)
12
8
4
AR 0 1 -4
2
3
4
5
6
7
MR
Quantity
Measuring the maximum profit using average curves 16
MC Total profit = £1.50 x 3 = £4.50
Costs and revenue (£)
12
AC
8
a
6.00 TOTAL PROFIT b 4.50 4
AR 0 1 -4
2
3
4
5
6
7
MR
Quantity
Profit maximisation
Loss minimising
Loss-minimising output MC
Costs and revenue (£)
AC
AC
LOSS AR
AR O
Q
MR
Quantity
Profit maximisation
Short-run shut-down point
Costs and revenue (£)
The short-run shut-down point
AC AVC
P= AVC
AR O
Q Quantity
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