the last worker currently employed by a firm

To get the most profit, you need to set higher prices and lower quantities than the competitive market. In the case of monopoly, the company will produce more products because it can still make normal profits. The first order condition for each input equates the marginal revenue product of the input (the increment to revenue from selling the product caused by an increment to the amount of the input used) to the marginal cost of the input.įor a firm in a perfectly competitive market for its output, the revenue function will simply equal the market price times the quantity produced and sold, whereas for a monopolist, which chooses its level of output simultaneously with its selling price. In this case one can use calculus to maximize profit with respect to input usage levels, subject to the input cost functions and the production function. Fourth, rather than a function giving the cost of producing each potential output level, the firm may have input cost functions giving the cost of acquiring any amount of each input, along with a production function showing how much output results from using any combination of input quantities. Third, since the first order condition for the optimization equates marginal revenue and marginal cost, if marginal revenue (mr) and marginal cost(mc) functions in terms of output are directly available one can equate these, using either equations or a graph. Second, if specific functional forms are known for revenue and cost in terms of output, one can use calculus to maximize profit with respect to the output level. First, since profit equals revenue minus cost, one can plot graphically each of the variables revenue and cost as functions of the level of output and find the output level that maximizes the difference (or this can be done with a table of values instead of a graph). There are several perspectives one can take on profit maximization. The firm profit will decrease because the extra unit level increase the cost which is greater than the revenue. However, if the output level is greater than Q*, MR the last worker currently employed by a firm

The firm produce extra output because the revenue of gaining is more than the cost to pay. When produced less than Output of equilibrium quantity (Q*), as the red part showed, MR is greater than MC. The firm produces at this output level can maximize profits. In the supply and demand graph, the output of Q* is the intersection point of MR and MC.

The last worker currently employed by a firm