© EMC Publishing, LLC.

Slides:

Advertisements

Similar presentations

At what Q is TR maximized? How do you know this is a maximum

Advertisements

MICROECONOMICS Review for Exam Three (Chapters ) Fall 2014.

1  The Role and Purpose of Firms (Producers)  Economic profit vs accounting profit.  Long-run and short-run production.  The law of diminishing marginal.

Economics 101 – Section 5 Lecture #16 – March 11, 2004 Chapter 7 How firms make decisions - profit maximization.

Profit Maximization Chapter 9-1. Profit Maximization The objective of a for-profit firm is to maximize profit. Profit is total revenue less the costs.

Supply Chapter 5.

Chapter 29: Labor Demand and Supply

Factor Markets Chapter 18.

Input Demand: Labor and Land Markets

Why does production have a cost? because.... Scarcity Inputs are scarce. They have opportunity costs.

Supply Review Economics Mr. Bordelon.

Chapter 5 Section 2.  Marginal Product of Labor ◦ The change in output from hiring one additional unit of labor  Increasing Marginal Returns ◦ Workers.

Business Costs and Revenues Reference 6.1 and 6.2.

1 Essential Question: Explain the goal of checking “Productivity;” define input and output; list and describe fixed costs, variable costs, and marginal.

CHAPTER 7: SECTION 1 About Business Firms

CH5: SUPPLY Essential Question

Marginal Production shrinks as each unit of input is added

Imagine that you are the owner and CEO of a very small firm You have a plot of land (already paid for) You can hire workers to help you –More workers,

Chapter 5: Supply Section 2

COSTS OF PRODUCTION How do producers decide how much of a good to produce?

Business Costs and Revenues Reference 6.1 and 6.2.

Economics Chapter 5 Supply.

Costs of Production How much to produce?. Labor and Output How the number of workers affects total production?

Supply Chapter 5 Section 2.

Who wants to be an accountant?. What is the Goal of Business Firms?  The goal of every company is to MAXIMIZE PROFITS.

Chapter 5 Supply. Chapter 5 Section 1: What is Supply Main Idea: For almost any good or service, the higher the price, the larger the quantity that will.

Increasing, Diminishing, and Negative Marginal Returns Labor (number of workers) Marginal Product of labor (beanbags per hour) –1 –2.

Economic Profit, Production and Economies of Scale.

Costs of Production Unit 7 Decision, Decisions. Remember…… Scarcity forces people to make decisions about how they will use their resources!!! **Economic.

Chapter 5: Supply Section 2. Slide 2 Copyright © Pearson Education, Inc.Chapter 5, Section 2 Objectives 1.Explain how firms decide how much labor to hire.

Section D: 5.2 Outline: “Costs of Production”: Read pages

Short-run costs and output decisions 8 CHAPTER. Short-Run Cost Total cost (TC) is the cost of all productive resources used by a firm. Total fixed cost.

Marginal Productivity Theory. Marginal Physical Product Extra Output from each additional unit of resource.

Lesson Objectives: By the end of this lesson you will be able to: *Explain how firms decide how much labor to hire in order to produce a certain level.

LABOR DEMAND PROBLEM – How does an employer decide how many people to hire?

Do Now According to some reports, supermarkets make a profit of three to six cents for every dollar of revenue. Where does the rest of the money go????

Chapter 5: Supply Section 2. Slide 2 Copyright © Pearson Education, Inc.Chapter 5, Section 2 Objectives 1.Explain how firms decide how much labor to hire.

Do Now 1)What is the difference between supply and quantity supplied? 2)Are hotel rooms elastic or inelastic? Why? 3)What do producers have to consider.

9.1 Input Demand: Labor and Land Markets Input demand is said to be a Derived demand because it is dependent on the demand for the outputs those inputs.

The Production Function Chapter 13. Firm Behavior Firm’s have an economic goal to maximize profits Profits = Total Revenue – Total Costs.

Cost of Production Chapter 5 Section 2.

Bell Ringer!  In your mind, what defines “success” for a business ?  What non-financial factors might determine success for a particular business?

Mr. Weiss Section 13 – Module 71 Activity – More on Marginal Product Quantity of Labor Total Output O The following table.

Chapter 13: Costs of Production. The Supply and Demand In Economy, Supply and Demand Basically runs all market activity. In Economy, Supply and Demand.

PROFIT MAXIMIZATION. Profit Maximization  Profit =  Total Cost = Fixed Cost + Variable Cost  Fixed vs. Variable… examples?  Fixed – rent, loan payments,

Cost of Production. Labor and Output Marginal product of labor Change in output from hiring one additional unit of labor Increasing marginal returns Level.

(section 2) Costs of Production

Supply Review Economics Mr. Bordelon.

Chapter 5: Supply Section 2

Costs in the Short Run.

Economics Class Notes October 12 and 13

5-2: What Are the Costs of Production?

Chapter 17 Appendix DERIVED DEMAND.

Bell Ringer! In your mind, what defines “success” for a business ?

© EMC Publishing, LLC.

© EMC Publishing, LLC.

Profit Maximization Chapter 9-1.

Chapter 5 Section 2.

The Costs of Production

Microeconomics Question #2.

Marginal Revenue & Monopoly

Section 4.4 Applications to Marginality

The Production Function

Profit Maximization.

Microeconomics Part 2 Copyright © Texas Education Agency, All rights reserved.

Chapter 5: Supply Economics Mr. Robinson.

ECONOMICS : CHAPTER 5-- SUPPLY

Chapter 5: Supply Section 2

Chapter 5: Supply Section 2

Chapter 5: Supply Section 2

Presentation transcript:

© EMC Publishing, LLC

Revenue and Its Applications 7 Section 3 Revenue and Its Applications © EMC Publishing, LLC

Total Revenue and Marginal Revenue Marginal revenue (MR) is defined as the revenue from selling an additional unit of a good—that is, the change in total revenue that results from selling an additional unit of output. © EMC Publishing, LLC

Firms Have to Answer Questions How much should we produce? What price should we charge? © EMC Publishing, LLC

How Much Will a Firm Produce? A firm should continue to produce as long as marginal revenue is greater than marginal cost. In fact, economists state that if a firm seeks to maximize profits or minimize losses, it should produce the quantity of output at which MR = MC. © EMC Publishing, LLC

What Every Firm Wants: To Maximize Profit Maximizing profit is the same as getting the largest possible difference between total revenue and total cost. © EMC Publishing, LLC

How to Compute Profit and Loss When a firm computes its profit or loss, it first determines the total cost and total revenue and then finds the difference. Total cost = Fixed cost + Variable cost. Total revenue = Price x Quantity of good sold. Profit (or loss) = Total revenue - Total cost. © EMC Publishing, LLC

How Many Workers Should the Firm Hire? The law of diminishing returns states that if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease. Suppose a firm wants to add workers. As long as the additional output produced by the additional workers multiplied by the selling price of the good is less than the wage paid to the workers, it is a good idea to hire the additional employees (See Exhibit 7-6). © EMC Publishing, LLC

Exhibit 7-6 from the Student Text The law of diminishing returns states that if additional units of one resource are added to another resource in fixed supply, eventually the additional output will decrease. © EMC Publishing, LLC

Questions? © EMC Publishing, LLC