Profit maximisation

Cards (8)

What is profit?
The reward for risk taking in the form of money
What is profit maximisation?
The point at which marginal revenue is equal to the marginal cost
What is marginal revenue?
The additional revenue gained from selling one more unit of a product
What is marginal cost?
The additional cost of producing one more unit of a product
What is marginal profit?
Marginal revenue - marginal cost
What is positive marginal profit?
Where the marginal revenue is more than the marginal cost, meaning firms would increase output
What is negative marginal profit?
Where the marginal revenue is less than the marginal cost, meaning that firms would decrease output
When is profit equilibrium reached?
When the marginal cost equals the marginal revenue, meaning that firms wouldn't increase or decrease output as either option would decrease their profitability