### Understanding Profit Maximization and Profit Determination---### Key Concepts#### 7. Profit Maximization RuleA company's profit maximization is equal to the output rule. This is denoted as MR = MC.- **MR (Marginal Revenue)**: The additional revenue that one more unit of the product will bring.- **MC (Marginal Cost)**: The cost of producing one additional unit of the product.#### 8. Decision-Making Based on ProfitA firm's decision on how much to produce and whether to stay in business is based on ___accounting___ profit. (Choose between economic or accounting).#### 9. Determining ProfitProfit can be determined in two ways:---### Profit Determination Table| **Method** | **Description** | **Comparison** ||------------|------------------|----------------|| **Profit = Total Revenue – Total Costs** | | || **Profitable**: | When Total Revenue (TR) is greater than, equal to, or less than Total Costs (TC): | TR (pick one: **>**, =, <) TC || **Breakeven**: | When Total Revenue (TR) equals Total Costs (TC): | TR (pick one: >, **=**, <) TC || **Loss**: | When Total Revenue (TR) is less than Total Costs (TC): | TR (pick one: >, =, **<**) TC || **ATR (this is price) – ATC = price/quantity** | | || **Profitable**: | When Average Total Revenue (ATR) is greater than, equal to, or less than Average Total Costs (ATC): | Price (pick one: **>**, =, <) ATC || **Breakeven**: | When Average Total Revenue (ATR) equals Average Total Costs (ATC): | Price (pick one: >, **=**, <) ATC || **Loss**: | When Average Total Revenue (ATR) is less than Average Total Costs (ATC): | Price (pick one: >, =, **<**) ATC |---### Explanation- **Profitable Scenario**: A firm is profitable when Total Revenue (TR) or price is greater than Total Costs (TC) or Average Total Costs (ATC), respectively.- **Breakeven Scenario**: A firm breaks even when Total Revenue

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7. A company's profit maximization is equal to the output rule. This is MR =_MC__ 8. A firm's decision on how much to produce and whether to stay is business is based on _accounting profit. (Choose economic or accounting) 9. Profit can be determined in two ways: ATR (this is price) – ATC = price/quantity Profitable: Price (pick one: >, =, <) ATC Profit = Total Revenue – Total Costs Profitable: TR (pick one: >, =, <) TC Breakeven: Price (pick one: >, =, <) ATC Breakeven: TR (pick one: >, =, <) TC Loss: Price (pick one: >, =, <) ATC Loss: TR (pick one: >, =, <) TC

7. A company's profit maximization is equal to the output rule. This is MR =_MC__ 8. A firm's decision on how much to produce and whether to stay is business is based on _accounting profit. (Choose economic or accounting) 9. Profit can be determined in two ways: ATR (this is price) – ATC = price/quantity Profitable: Price (pick one: >, =, <) ATC Profit = Total Revenue – Total Costs Profitable: TR (pick one: >, =, <) TC Breakeven: Price (pick one: >, =, <) ATC Breakeven: TR (pick one: >, =, <) TC Loss: Price (pick one: >, =, <) ATC Loss: TR (pick one: >, =, <) TC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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