Profit Equals Total Revenue Minus Total Cost

The first thing to do is determine the profit maximizing quantity.

Profit equals total revenue minus total cost. Profit maximisation will also occur at an output where mr mc. Total profit equals total revenue minus total cost or. In the illustration this occurs at the output level q 0. When mr mc the firms is increasing.

Marginal cost is. In classical economics it is assumed that firms will seek to maximise their profits. 4 a small cost that does not affect a firm s profit significantly the cost of increasing the margin between cost and price the cost of producing the next unit. This occurs when the difference between tr tc is the greatest.

4 total revenue minus total cost total revenue minus marginal cost marginal revenue minus marginal cost gross revenue minus depreciation 10. Profit total revenue tr total costs tc or ar ac q. Substituting this quantity into the demand equation enables you to determine the good s price. At the output level q 0 total revenue equals tr 0 total cost equals tc 0 and total profit is the difference.