1 / 20

Chapter 5 : Lesson 3 Costs, Revenue, and Profit Maximization

Chapter 5 : Lesson 3 Costs, Revenue, and Profit Maximization. Essential Question: Why is marginal revenue more important than the average revenue?. Pretend you are going to open a hotdog selling business. Now list your costs List the costs that vary with how much you produce

ccoates
Télécharger la présentation

Chapter 5 : Lesson 3 Costs, Revenue, and Profit Maximization

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 5 : Lesson 3Costs, Revenue, and Profit Maximization

  2. Essential Question: Why is marginal revenue more important than the average revenue?

  3. Pretend you are going to open a hotdog selling business. • Now list your costs • List the costs that vary with how much you produce • List the costs that you always have no matter how much you produce. • What price do you charge per hotdog? How do you know how much to charge?

  4. Fixed Cost: the cost that a business incurs even if the plant is idle and output is zero. Also known as “overhead”

  5. Variable Cost: a cost that changes with output…associated with labor and raw materials

  6. Cost What is the equation total cost? FC + VC = TC

  7. Total Cost: sum of variable cost plus fixed cost; all costs associated with production.

  8. Revenue Equation P x Q = TR

  9. Units Bought Total Revenue Price 1.00 1,000 $1,000 1,000 1.25 800 TR PROFIT 1.50 500 750 2.00 200 400 5.00 50 250 3 30 10.00

  10. Units Bought Total Revenue Total Costs Price 1.00 1,000 $1,000 $330 1,000 290 1.25 800 230 1.50 500 750 2.00 200 400 135 5.00 50 125 250 3 30 116 10.00

  11. Units Bought Total Revenue Total Costs Price Profit 1.00 $670 1,000 $1,000 $330 1,000 290 710 1.25 800 230 520 1.50 500 750 265 2.00 200 400 135 5.00 50 125 125 250 (86) 3 30 116 10.00 Is business in the business to make a profit? NO!!! To MAXIMIZE PROFIT!!!!

  12. Break Even Point: the total output or total product the business needs to sell in order to cover its total costs • What is the # of units sold at $1.25 to break even?

  13. Marginal Revenue: extra revenue from all the sale of one additional unit of output

  14. Marginal Cost: extra cost of producing one additional unit of production.

  15. What is the profit maximizing output????

  16. Profit-Maximizing Quantity of Output : Level of production where marginal cost is equal to marginal revenue

  17. Profit Maximizing = MR = MC • Profit-Maximizing quantity of output: MR = MC

  18. The Production Function

  19. E-Commerce: electronic business or exchange conducted over the Internet.

  20. Review Question: Chapter 5 : Lesson 3 Read pages 142-146 and answer Review Questions on page 146. Hand in Google Class Room.

More Related