The Causes and Effects of a Recession Essay

because we see the highest expected profit of $1,075 associated with this production level for cheese pizza and

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

30. According to the figure below, if the firm is maximizing profits, profit is represented by the area:

The point of profit maximization for the firm in the given scenario occurs at a quantity of 8 units. At this point they have maximized their profit and as you can see to go beyond this point would cause the firm to incur economic losses.

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.

Explain how a profit maximizing firm determines its optimal level of output, using marginal revenue and marginal cost as criteria:

Find the Profit Equation by substituting your equations for R and C in the equation . Simplify the equation.

The firm initially produces where MR=MC charging price P1 and quantity Qa. At this price the firm has a large amount of

George Santayana, a Spanish poet and philosopher said, "Those who do not learn history are doomed to repeat it." This quote applies to the Great Depression of 1929 and the Great Recession of 2008. There are many similarities between the two, like the causes, the actual events, and the aftermaths. Several factors led to the Great Depression, which were the following: overproduction by business and agriculture, unequal distribution of wealth, Americans buying less, and finally, the stock market crash of 1929. The Great Recession also had similar factors leading to it, like the housing “bubble” burst and less consumer spending. In both events, the Presidents enacted programs that they believed would help the American people.

b. What is Beth’s profit maximizing price and quantity? Answer: MR = MC at a price of $0.60 and quantity of 5 cups. c. At that price, what are Beth’s economic profit and total consumer surplus? Answer: Profit = (P - MC) Q = (0.60 - 0.20) 5 = $2. Consumer surplus is reservation price minus actual price for each cup sold: ($1.00 - $0.60) + ($0.90 - $0.60) + ($0.80 - $0.60) + ($0.70 $0.60) = $1. d. What price should Beth charge if she wants to maximize total economic surplus? What quantity would she sell? How much would total economic surplus be? Answer: She should set P = MC = $0.20. Nine (or eight) cups of lemonade would be sold. Total economic surplus is reservation price minus marginal cost for each cup sold: ($1.00 - $0.20) + ($0.90 - $0.20) + ($0.80 - $0.20) + ($0.70 - $0.20) + ($0.60 - $0.20) + ($0.50 - $0.20) + ($0.40 $0.20) + ($0.30 - $0.20) = $3.60. e. Now suppose Beth can tell the reservation price of each person. What price would she charge

The Great Depression and Great Recession were two unique events that had monumental impact on the economy. Both had similarities, and differences that made them unique. The Great Depression was caused by people living on credit, and when it was time to pay they didn’t have the money, this happened on a wide spread scale. The crashing of the stock market was what officially started the Great Depression in 1929. The great recession was caused by subprime mortgages as well, as risk taking by financial institutions. Much like the depression people were living over their heads, and when it was time to pay their bills they were unable to. Both the Great Depression and Great Recession were brought on by bubbles, for the Great Depression it was the stock market bubble, for the Great Recession it was the housing bubble.

A result on the next page shows that at sales price of $21.50, the sales quantity rises to 1,140,085 units and net profit turns to positive for the first time. Besides, if a company continues to reduce the price further, at the point of $15.50, it is where the company’s profit on product 101 is in the highest position as it gives the net profit of $3,901,908.

As an example, if fixed costs are $100, price per unit is $10, and variable costs per unit are $6, then the break-even quantity is 25 ($100 ÷ [$10 − $6] = $100 ÷$4). When 25 units are produced and sold, each of these units will not only have covered its own marginal (variable) costs, but will have also have contributed enough in total to have covered all associated fixed costs. Beyond these 25 units, all fixed costs have been paid, and each unit contributes to profits by the excess of price over variable costs, or the contribution margin. If demand is estimated to be at least 25 units, then the company will not experience a loss. Profits will grow with each unit demanded above this 25-unit break-even level.

8.5 cents will increase profits by 0.093 - 0.0850 = 0.0053. Sensitivity analysis also shows that up

This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that