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26 October, 17:16

Economists normally assume that the goal of a firm is to

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  1. 26 October, 18:15
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    Profit Maximisation

    Explanation:

    Profit is the difference between total revenue (receipts) from sale & total cost (expenditure) on production.

    Total Revenue = Price x Quantity; Total Cost = Average Cost x Quantity

    Economists study all the producer behaviour, based on assumption that : Goal of firm is Profit Maximisation.

    Maximising Profit implies maximising the difference between Total Revenue & Total Cost [ TR - TC]. This further leads to producer equilibrium rule of Marginal Revenue = Marginal Cost [MR = MC]; i. e additional revenue per unit sold equals additional cost per unit production.
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