By: Stephen Pienciak Henry Hwang

 An

assumption that firms try to achieve the highest possible level of profits given their production function.
• Total Revenue - Total Costs = Profits

If Price is \$35 per Object

Object(s)
0 1 2

Total Costs to Produce Object 50 70 100

Total Revenue
0 35 70

Profits
-50 -35 -30

3
4 5

150
230 350

105
140 175

-45
-90 -175

If Price is \$70 per Object

Object(s)
0 1 2

Total Costs to Produce Object 50 70 100

Total Revenue
0 70 140

Profits
-50 0 40

3
4 5

150
230 350

210
280 350

60
50 0

If Price is \$100 per Object

Object(s)
0 1 2

Total Costs to Produce Object 50 70 100

Total Revenue
0 100 200

Profits
-50

30 100

3
4 5

150
230 350

300
400 500

150
170 150

 Maximizing

 Marginal

Revenue- the change in total revenue due to a one-unit increase in quantity sold  Marginal Revenue=Marginal Cost or Price=Marginal Cost  Why do both work?

Object(s)
0 1 2

Total Costs to Produce Object 50 70 100

Marginal Costs
-20 30

3
4 5

150
230 350

50
80 120