Week 9 Firms, profits, optimal choice

Profit formula

π = R-TC (revenue - total cost) OR π=PQ-cQ (derived: P = π/Q + C)

Constraint

demand for a product

Demand

consumers max willingness to pay, what firms can do

Isoprofit curve

a curve based off profit formula, graphed

Break even

no profit

Revenue

R=PQ (price * quantity)

Total cost

TC = VC + FC (variable cost + fixed cost); TC = cQ (constant * quantity); TC = F + xQ + qQ²

Demand curve

feasible frontier, above this price = no sale, consumers won’t buy because its below their expected price

Profit curve

how much one produces, necessary price accommodation to generate a maximum amount of profit

Marginal cost (MC)

change in total cost / change in quantity (change in TC / change in Q)

Average cost (AC)

total cost / quantity (TC/Q)