Maximizing Profit Under Competition
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- Опубликовано: 17 мар 2015
- A company in a competitive environment does not control prices. So the key to maximizing profit is choosing how much to produce. To do that, we need to factor in the costs involved in production. So what exactly are the costs? How do these costs influence how you maximize profit? And, remember, if you want to think like an economist, you must factor in opportunity cost!
In this video, we define profit, including how to calculate total revenue and total cost. We also go over fixed costs, variable costs, marginal revenue, and marginal cost.
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The idea of margins is something so important and fundamental in economics that every econ teach ought to give a clear clarification of it before moving on. However, most of the teachers simply just don't do it. Thank you guys so much and I wish I could've found this video before my perfect&monopoly test ahead of time T_T
that is so clearly explained,thank you so much!
Awesome video to you guys!! Definitely earned a subscriber!
Thanks a lot sir . Paying respect from India
Thank you so much! The video helps a lot!
really helfpful stuff. Thanks!
I watched this and other videos, great resource, WELL DONE!
simple and easy. thanks
This video saved me. Thank you!
Thank you so much 💖 It really helped
Some of the Practice Questions linked to this video (those about temporarily shutting down) would be better to ask after the next video.
Thank you so much! Such a great video!
At 10:39, you’re saying that P=MC. That’s true only at the point where the marginal cost curve intersects the price (or MR or AR curve, the horizontal line). Instead of writing it as P=MC, it should read as P=MR. At the point of intersection, P=MR=MC.
I was going to say the same thing :)
Oh my god, this's saved my life immediately for my upcoming presentation
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Thank you Sir. From Nigeria
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Shouldn't MC be a u shaped curve
I didn't get what opportunity costs are associated to economic profit.
There's a mistake in this video. It should have been P=MR, for your information. Location: 11:40
No it's correct. He's saying the firm in order to maximize profit will produce up to the point where P = MC
@@Andy-em8xt I am aware of that, other videos presented P = MR for the horizontal. That is the reason I wrote it down, thanks
MR=MC and MR=P, therefore MC=P
@@ngocanhnguyen8837 Could you please explain that
How to calculate maximum achieveable profit
جيد
Thanks for making me listen to you read slides and not actually explaining anything
You must be very thick
At the beginning you keep saying price is equal to marginal revenue, then you switch and start saying price is equal to marginal cost. Did I miss something? Or is it because we are looking for maximum profit in which case all three would be equal? That point could use some clarification.
Market Price is the same thing as revenue, that is, the revenue on each product we sell. For example, if you’re selling bread at $4 each and you happen to sell only one, the revenue on that bread would P*Q which is $4*1, so on that one piece of bread the revenue is $4 because we sold only one, Total revenue is the addition of the individual revenue on each piece of bread. Marginal cost is how much it cost us to make an additional unit of that product (remember profit is revenue minus cost), so if our MC is equal to the price of that product (ignoring Average cost for now) we will be maximizing profit. Hope this helps.
The firm wants to produce up to the point MR = MC. At that point MR = MC = P.
Think about it, if the cost of producing an extra barrel is more than the revenue it gets, the firm loses money by producing that extra barrel.
To maximizing profit, a firm must produce MR=MC(1). Because this is a competitive market, a firm is a price taker so its MR equal to the market price which is MR=P(2)
Combine (1) and (2) we have MR=MC=P
=> MC=P
this seems counter intuitive to me; surely if something costs $5 and the revenue is $5 you've made nothing?
Yeah, you make exactly zero profit. You'd arguably be in a net loss depending on how you want to look at it due to the opportunity cost.
wheres my free skin
Strippers and Donkeys....we're still talking about economics right?
Wrong. Marginal cost curve is downward sloping. It's stupid to run an oil well above its rated speed. What we can do is install two oil wells to produce more oil. More quantity we produce more profit margin we get. This is because, mass production machines produce more quantity per unit labour, we get huge discounts on purchase of raw materials in bulk, human resource is optimally utilized for example, maintenance engineers and accountants are mostly sitting idle in small industries. The minimum quantity above which the business starts profiting is known as break even point. Above that, the more quantity you produce more is the profit margin.
I hate this. It is patronising and irritating. I know small children that would be offended by their tone and stupid childish effects. Awful.
Thanks sir