Earnings Maximization

Profit Maximization 16.08.2019
 Profit Optimization Essay

8/18/2009

Relevant Equations:

PROFIT-MAXIMIZATION AND EMPLOYMENT OF INPUTS

Total Revenue (TR)

TR  P  Q

Limited Revenue (MR)

Optimal Insight Usage

MR 

TR Q

Relevant Equations:

Net Marginal Revenue of Labor (NMRL)

Relevant Equations:

Minor Revenue Merchandise of Labor (MRPL)

NMRL  MR  MCcomponents / components

Marginal Item of Labor (MPL)

MRPL  NMRL  MPL

Marginal Expense of Labor (MC L)

MPL 

Q L

MCL 

TC L L

Profit Making the most of Rule pertaining to Employing a Varying Input

Use a variable insight (e. g. labor) up to the point where the MRPL = MCL If PL is constant for all degrees of labor employed by the organization, MCL = PL and the firm will need to use the suggestions until MRPL = PL

Numerical Case in point

Q zero 5 15 30 forty five 48 53 55 P $240 230 210 one hundred and eighty 160 a hundred and forty four 134 130 L zero 10 twenty 30 45 50 sixty 70

Assume:

Components Price = $20/unit

Hourly Wage Rate = $9/hour

one particular

8/18/2009

Numerical Example

Queen 0 S $240 TR $0 MISTER -NMR D -L zero MPL -MRPL -MC L --

five

15 35

230

210 180

1150

3150 5400

$230

2 hundred 150

$210

180 145

10

twenty 30

zero. 5

1 ) 0 1 . 5

$105

180 195

$9

9 9

EARNINGS ANALYSIS IN THE FIRM

forty five

48 53 55

160

144 134 130

6400

6912 7102 7150

75

64 35 24

80

44 18 4

40

50 60 70

1 . 0

zero. 8 0. 5 0. 2

80

35. 20 9 0. 8

being unfaithful

9 on the lookout for 9

Break-Even & Pregressive Profit

Break-Even:

Incremental Revenue:

Total Profit

TR  TC G (Q)  TVC  TFC G (Q)  AVC (Q)  TFC P (Q)  ( AVC )(Q)  TFC ( P  AVC )(Q)  TFC TFC QBEP  P  AVC

  TR  TC

Marginal Earnings

T  Q M  MR  MC M 

Numerical Case in point:

Magic " S, ” a pret a manger restaurant that specializes in submarine sandwiches, has a regular monthly fixed cost of $60, 500. Most of the income for this firm is derived from their featured food: a warm submarine meal, small beverage, and french fries for $6. The average adjustable cost of the meal is around constant by $3. 70 over the relevant range of creation. How various specials if the company sell off (a) to break-even? (b) to earn a goal monthly income of $24, 000?

Answer:

a. Break-even quantity

QBEP  QBEP QBEP

TFC P  AVC $60, 000  $6. 00  $3. 60  25, 000specials

2

8/18/2009

Solution:

m. Quantity level to gain $24, 1000 per month

TFC   P  AVC $60, 000  $24, 500 Q $6. 00  $3. 70 Q  35, 000specials Q

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