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Egt 1.1

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EGT 1

Task 1

William Jarrod Reed

Western Governors University

Student ID: 000178779

Mentor: Aminah Abdul-Hakim

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

Understanding the concept of profit maximization lies with the explanation of total revenue to total cost and marginal revenue to marginal cost. Total revenue is nothing more than the total quantity of a firm’s sales of a given product. On the other hand, marginal revenue is simply the increased revenue the firm will attain when it sells precisely one more unit of a product. We look to total revenue to reveal just how much money the firm will accrue from selling a specific quantity of product and we look to marginal revenue so that we might understand how much additional money the firm will make from the sale of each additional unit of that product. On the other side of the coin total cost tells us the entire economic cost incurred by the firm when it produces a specific quantity of a product. Marginal cost on the other hand describes the economic cost incurred by the firm in the production of one more unit of product. In the context of these definitions profit can be explained as the total revenue minus operating costs. Subsequently, profit maximization is the function of choosing a course of action, which will result in attaining the maximum profit for the firm. This maximization of profit is achieved by deciding…...

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