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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 11
Use the marginal revenue/marginal cost rule to explain why each of the following purported rules for obtaining maximum profits is incorrect.
1. Maximum profits can be found by looking for that output for which profit per unit (that is, price minus average cost) is as large as possible.
2. Because the firm is a price taker, the scheme outlined in point 1 can be made even more precise-maximum profits may be found by choosing that output level for which average cost is as small as possible. That is, the firm should produce at the low point of its average-cost curve.
1. Maximum profits can be found by looking for that output for which profit per unit (that is, price minus average cost) is as large as possible.
2. Because the firm is a price taker, the scheme outlined in point 1 can be made even more precise-maximum profits may be found by choosing that output level for which average cost is as small as possible. That is, the firm should produce at the low point of its average-cost curve.
Explanation
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1) Maximum Profit per unit is given at t...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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