5.1: Costs and Profit

Microeconomics 1e · LibreTexts

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    From LibreTexts, under CC BY-NC-SA 4.0, as the source states it; its equations are written in TeX, which the PDF shows typeset. This page at LibreTexts.

    Remember, the microeconomic question we are trying to answer is, “How can a firm maximize its profits?”

    We have seen that price decisions can impact revenues (session 2A: Elasticity). We also saw how high levels of allocative efficiency (i.e., producing what the customer wants) are needed to achieve success in the marketplace (session 1B: Supply and Demand).

    This session will discuss how choices regarding hiring and production can impact costs.

    From a business perspective, costs are of great importance. They are important because cost changes affect profits. And profit maximization is a common goal many businesses share.

    Profit = Total Revenue – Total Cost

    This page titled 5.1: Costs and Profit was last modified on Wed, 10 Jul 2024 19:59:56 GMT and is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Martin Medeiros.