Profit maximisation
What Profit maximisation means in Economics A-Level, as defined for AQA.
Definitions of Profit maximisation
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Reference: AQA
Achieved where marginal cost equals marginal revenue in the combined market, determining total output, with this constant marginal cost projected back to the individual sub-markets.
A use of understanding the mathematical and graphical differences between the three revenue concepts, alongside analysing firm behaviour and market structures.
A firm continues to hire workers up to the point where marginal revenue product exactly equals the marginal cost of labour, typically the wage rate.
The output level where marginal cost equals marginal revenue, which the traditional theory of the firm assumes firms aim to reach.
Output where Marginal Cost equals Marginal Revenue, which interpreting the cost curves allows a firm's analysis of.
Hiring workers up to the point where the marginal cost of labour equals the marginal revenue product of labour.
Topics that use Profit maximisation
- Costs of production (AQA A-Level)
- Marginal, average and total revenue (AQA A-Level)
- Price discrimination (AQA A-Level)
- The demand for labour, marginal productivity theory (AQA A-Level)
- The determination of relative wage rates and levels of employment in imperfectly competitive labour markets (AQA A-Level)
- The objectives of firms (AQA A-Level)
Related terms
- Marginal cost
- Marginal revenue
- Revenue maximisation
- Allocative inefficiency
- Arbitrage
- Average Cost of Labour (ACL)
- Average revenue
- Bounded rationality
Using Profit maximisation in the exam
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