AP Economics Mr. Bernstein Module 53: Profit Maximization November 4, 2014.

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AP Economics Mr. Bernstein Module 53: Profit Maximization November 4, 2014

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 Through Marginal Analysis, firms seek to find the level of output where Economic Profit is maximized 2

AP Economics Mr. Bernstein Marginal Analysis MR =  TR /  Q and MC =  TC /  Q 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!! 3

AP Economics Mr. Bernstein Profit Maximization Presented Graphically 4