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Profit Maximization – Marginal Revenue and Costs

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

Using Marginal Revenue and Marginal Costs to Maximize Profit The approach that we described in the previous section, using total revenue and total cost, is not the only approach to determining the profit maximizing level of output. In this section, we provide an...

Production Function – Estimate of Inputs

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How Does the Production Function Estimate Inputs? We’ve explained that a firm’s total costs depend on the quantities of inputs the firm uses to produce its output and the cost of those inputs to the firm. The firm’s production function tells us how much output the...

Cost Curve – Break Even Point

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Break Even Point on the Cost Curve? Again, the perfectly competitive firm will choose the level of output where Price = MR = MC. At this price and output level, where the marginal cost curve is crossing the average cost curve, the price the firm receives...

Long Run Average Cost and Industry Competitors

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does the Long-Run Average Cost Curve Affect Industry Competitors? The shape of the long-run average cost curve affects  the size and number of firms that will compete in an industry. Where the LRAC curve has a flat-bottomed area of constant returns to scale....

Technology Shifts the Long-Run Average Cost Curve

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How do Technology Shifts affect the Long-Run Average Cost Curve? New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry. New production technologies do not inevitably...
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