1 / 8

Profit

Profit. Perfect competition. Profit defined. Total Profit = TR - TC Profit per unit = AR – ATC Subnormal profit Normal profit Supernormal profit.

dcordell
Download Presentation

Profit

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. Profit Perfect competition

  2. Profit defined • Total Profit = TR - TC • Profit per unit = AR – ATC • Subnormal profit • Normal profit • Supernormal profit

  3. Profit maximisation comes at the point at which the marginal cost (MC) of producing an extra unit equals the marginal revenue (MR) from the sale of that extra unit. It is the point at which MC curve cuts the MR curve. Marginal cost is said to include all costs that allow for normal profit to be made. Normal profit is the amount of profit needed to keep a factor employed in its present activity in the long run. Profit maximisation (perfect competition)

  4. Supernormal Profit Where MR > MC Points to the left of the intersection of MC and MR At 2 units the MR is £50 and the MC £30. Supernormal profits of £20 have been made. Sales have been sacrificed to achieve supernormal profits. Supernormal profit (perfect competition)

  5. Profit Maximisation Where MR = MC At 3 units the MC is equal to MR. That is £50 (MR) and £50 (MC). The amount received from the sale of the extra unit (MR) is equal to the cost of producing that extra unit (MC) Profit Maximisation (perfect competition)

  6. Subnormal Profit Where MR > MC Points to the right of the intersection of MR and MC At 4 units the MR is £50 and MC £80. Subnormal profits of £30 have been made. The extra sales past 3 have come by selling each extra unit for less than the units cost to produce! Subnormal profit (perfect competition)

  7. Subnormal Profit (MR > MC) Profit maximisation (MR = MC) Supernormal Profit (MR < MC) Profit levels (perfect competition)

  8. Subnormal Profit (MR > MC) Profit maximisation (MR = MC) Supernormal Profit (MR < MC) Profit levels (imperfect competition)

More Related