Case study of the profit maximization principle

Profit maximization refers to a way for manufacturers to maximize profits by using various legal business methods.

The principle of profit maximization is the marginal return of output.

equal to marginal cost.

principles. The marginal benefit is the last increase in the revenue of one unit of sales and which volume, and the marginal cost is the increase in the cost of the last increase in the production of one unit of production. If the marginal benefit of adding one unit of production is greater than the marginal cost, it means that increasing production can increase the total profit, so the manufacturer will continue to increase production to achieve the maximum profit target.

Manufacturers engaged in production or goods not only require profits, but also require maximum profits, the principle of profit maximization is the principle that the marginal benefit of output is equal to the marginal cost. The marginal benefit is the increase in the last unit of sales, and the marginal cost is the increase in the cost of the last increase in the production of one unit. If the marginal benefit of adding one unit of production is greater than the marginal cost, it means that increasing production can increase the total profit, so the manufacturer will continue to increase production to achieve the maximum profit target.

If the marginal benefit of increasing the amount of hail produced by one unit is less than the marginal cost, it means that increasing production will not only not increase profits, but will result in losses, and manufacturers will not increase production but reduce production in order to achieve the maximum profit target. The total profit of the manufacturer can only reach the maximum when the marginal benefit is equal to the marginal cost.

If the total benefit is greater than the total cost, there will be a surplus, which will generate profits. It is worth noting that the profit mentioned here does not include normal profit, which is included in the total cost, and the profit mentioned here refers to excess profit.

If the total revenue is equal to the total cost, the manufacturer will not lose or earn, but only get normal profits, if the total revenue is less than the total cost, the manufacturer will incur a loss.

Profit is the difference between earnings and costs. In economics, as long as it is profitable, manufacturers will continue to operate, and there is no one who is willing to do loss-making business. However, the profit is in accounting.

There is a difference between the meaning and the meaning in economics. The benefits and costs in economics are different from the benefits and costs in accounting, thus making profits have accounting profits.

and economic profits.

The profit indicator calculation is simple and easy to understand. It is conducive to the rational allocation of enterprise resources and the overall economic benefits of enterprises.

of improvements.

Profit maximizationIn early Western capitalism, from the perspective of pure economics, the goal of corporate behavior was profit maximization. Recent economics has also added an ethical perspective.

It is believed that in the long run, only enterprises with business reputation and social responsibility will maximize their profits. When the marginal cost is equal to the marginal benefit (mc=mr), the profit is maximized.

In economics, the assumption of corporate profit-maximizing behavior is calculated as follows. It is assumed that the quantity produced can be sold completely

Profit = Revenue Expenses = Selling Price of Goods Production Quantity Expenses.

1. MR=MC, that is, marginal profit = marginal cost.

1) When MR MC, it means that the manufacturer's income from each additional unit of production is greater than the cost, and 2) When MR MC, it means that the manufacturer's income from each additional unit produced is less than the cost of the product, and there is a loss, not the maximization of profit.

3) mr=mc, which indicates that the manufacturer should get the profits, and the profits are maximized.

2. The principle of profit maximization is divided into the organizational form of manufacturers and the meaning of profit in economics.

1) Organizational form of the manufacturer. Generally speaking, an enterprise can be organized in three forms: a sole proprietorship (sole proprietorship), a partnership enterprise, and a joint-stock company. A sole proprietorship is owned by a single person.

A partnership is owned by two or more people. Joint-stock companies are also often owned by many people, but they act according to a separate law from the law of ownership. Therefore, the continued existence of the partnership depends on all partners living and agreeing to maintain the business.

A joint-stock company can exist longer than any one owner. As a result, most businesses are organized in the form of joint-stock companies.

2) The meaning of profit in economics. Profit is the difference between earnings and costs. In economics, as long as it is profitable, manufacturers will continue to operate, and there is no one who is willing to do a loss-making business.

However, there is a difference in the meaning of profit in accounting and economics. The benefits and costs in economics are different from the benefits and costs of accounting, so that profits are divided into accounting profits and economic profits.