Egt1 Task 1

1144 Words5 Pages
EGT1
Task: 309.1.1.05, 06 In business there are certain factors that have to be evaluated before a company can see if a profit has been made. To even get to the point where a profit will be made there has to be a product that is sold whether it is a tangible or an intangible product. There has to be something that the business is selling in order to make that profit. The amount of profit that is attained is the outcome of the total revenue minus the total cost. This will then show the business what the remaining profit is. Business is like a puzzle, all the pieces have to fit and work together to have the puzzle complete. In business things have to work together or it won’t work and all the hard work that was put in to making
…show more content…
If a company can make a profit with low expenses, then they have succeeded in profit maximization. Companies strive to make a profit, but if they can reach their profit maximization then that’s even better.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:
When a firm wants to determine its optimal level of output using marginal revenue and marginal cost the firm needs these two to be equal. Marginal revenue is a change in the total revenue when one or even more units of output are sold. Marginal cost is the cost associated with producing one or more units. Optimal level of output is the desired level of goods or even service that is produced by a company. When the revenue and the cost become equal then the firm that uses profit maximization to determine the optimal level of output has succeeded.

Explain what action a profit maximizing firm takes if marginal revenue is greater than marginal cost:
In a profit maximizing firm when the marginal revenue is greater than marginal cost the firm should increase production. If there is extra production that increases revenue and doesn’t add to cost, then of course profits will increase. When there is increase revenue profits will go up, and with no additional cost to the increase. This is something that is very ideal to a business. When this happens it’s almost to perfect. Increase in profit with no cost to

More about Egt1 Task 1

Get Access