Transcription of Chapter Nine: Profit Maximization
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Chapter Nine: Profit Maximization
Chapter 9 Lecture Notes 1 Economics 352: Intermediate Microeconomics Notes and Sample Questions Chapter 9: Profit Maximization Profit Maximization The basic assumption here is that firms are Profit maximizing. Profit is defined as: Profit = Revenue Costs (q) = R(q) C(q) )q(Cq)q(p(q) = To maximize profits, take the derivative of the Profit function with respect to q and set this equal to zero. This will give the quantity (q) that maximizes profits, assuming of course that the firm has already taken steps to minimize costs.
Notes and Sample Questions Chapter 9: Profit Maximization ... Chapter 9 Lecture Notes 4 Example: Imagine that demand is given by q = 80 – 2p. To calculate the marginal revenue function, we need to rewrite this so that price is a function of quantity, or: ... elasticity of demand (ε) …
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