Economics (AS)·Revenue & profit maximisation · NSSCAS 3.2b
Revenue & profit maximisation (MC = MR)
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Last lesson we measured a firm's costs; now we measure the money it takes in. We define the three revenue measures — total, average and marginal revenue — and calculate them in a table. We draw the average and marginal revenue lines for a price-taker and for a price-maker, define profit as total revenue minus total cost, and meet the golden rule of profit maximisation: produce where marginal cost equals marginal revenue. This rule powers every market-structure lesson that follows.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Economics (AS) 3.2b):
- Describe the principle of profit maximisation as a goal
- Calculate and illustrate total, average and marginal revenue
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