Egt1 Task 1

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

Objective: Analyze the effect of changes in marginal revenues and costs on a firm’s profit-making potential.

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

In this paper I am going to explain some of the key terms that companies need to keep in mind when operating their business. First, we will start with marginal revenue, which is defined simply as the extra revenue that is made for each additional unit of a product that is sold. This is directly related to marginal cost, which is what it costs the company to make that additional unit of product.

Profit maximization is a company’s process they undergo to determine the price levels and the best output in order for them to maximize their return. Usually the company will adjust factors that are

a. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?

To calculate profit maximization one may first calculate profit, which is Profit = Total Revenue – Total Costs. The following graph illustrates the organization’s steady growth in profitable business, but declining profit maximization:

Profit maximisation is the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue - total cost method relies on the fact that profit equals revenue minus cost, and the marginal revenue - marginal cost method is based on the fact that total profit in a perfectly competitive market reaches its maximum point where marginal revenue equals marginal cost.

Choosing to increase the price of his old books would seem as though he is making a bad business decision,but it will allow an increase in revenue to take place. Mr. Bury can calculate is total revenue by examining how much the quantity of good sold and then multiply it by its price. This type method is used to measure how much money a company makes from selling its products; before any cost are considered (Tucker, 2013, para.4). Mr. Bury business can choose to sell his older books at a higher price, and reduce the price on the new books, and this will allow increasing profits to takes place. When analyzing the current for the newer books there was no change in its consumers and this based on

Figure 1. Diagram to illustrate the Neo-Classical model. (Source: Author)Figure 1 illustrates the standard Neo-Classical approach. Profit maximisation occurs when the marginal cost [MC] of producing an additional unit equals the marginal revenue [MR] from the sale of an additional unit.

Businesses and service industries make profit by selling a product for more than the cost to produce it. This serve as basic source of funds for any company and it is also a method that brings in the most money.

2: PROFIT FORMULA: this portion describes how a firm can achieve its breakeven point to corresponding with focus customer?

Due to this reason, they have to satisfy the shareholders so they have to maximum the return of shareholders by increasing the gross profit. There are two basic ways to increase the gross profit: increasing the revenue, decreasing the every cost. But of course, the mainly one of these two is increasing the revenue.

2.     Rational behavior on the part of the firm to achieve its goal of profit maximization.