We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Costs, Revenues and Production Decisions - Essay Example

Therefore, whenever a firm tries to maximize its profits, it is trying to identify the level of output and the price per unit to be charged so that the revenue is maximized and the costs are minimized so that profits are maximized. In the following, this paper shall elaborate upon how cost curves and revenues play into the production decisions. The discussion will initiate by reviewing the notions of costs and revenues and how these are related to the production decision of the firm. Then the discussion shall move on to show how considerations of costs and revenues impact the production decision. Finally, the paper will conclude with a summary of the findings. Costs and output The primary decision that a producer has to take is to choose its input mix. Each possible input combination given the factor prices, is associated with a particular cost. The firm’s challenge is to identify the combination of inputs that is most efficient, i.e., the combination of inputs that yields the maximum output at some given level of cost, or for some given level of output the efficient input combination minimizes the total cost. Thus, the least cost combination of inputs is known as efficient. Production in the short run involves some fixed costs, i.e., costs that do not depend upon the level of output as well as variable costs, i.e., costs that vary with the level of output. The efficient combination of inputs minimizes these variable costs. ...
As a result, the amount of labour required to produce an additional

Check these samples - they also fit your topic

Production, Costs, and Profits
Economists usually consider the implicit costs and explicit costs of operating, often called as opportunity cost, while accounting cost do not count the explicit costs of the owner. Ralph Bryns, 2011 argues that a business becomes profitable in the overall perspective when a firm’s revenue exceeds the explicit and implicit costs.
4 pages (1000 words)Admission/Application Essay
Macro- and Micro Analysis for New Services Production
The company will be launching a consulting service that works with executive leadership to build more marketing prowess and increase management competency. Increasing revenues and profit maximization The Internet represents tremendous opportunities to highlight a company’s brand, with growth in mobile usage and broadband subscribership.
3 pages (750 words)Essay
Production, Costs and Profits
Firstly, the manager should consider the costs of additional capital as compared to cost of employing new workers. Moreover, he should also consider whether adding new workers will help increase the output or it will result in falling output. In the short run, the capital is fixed and as more workers are added to the fixed capital, initially with each additional worker the marginal revenue product of the labor will increase as the restaurant will experience increasing returns to scale.
4 pages (1000 words)Essay
Supply: Production, Costs, and Profits
The magnitude of economic cost is dependent on the value of the foregone benefits of the best alternative and the cost of the alternative selected. The main difference between accounting cost and economic cost is that the later factors in the concept of opportunity cost (Boyes & Melvin, 2011).
4 pages (1000 words)Essay
Absenteeism:causes,costs and remedies
Its annual cost has been estimated at over $ 40 billion for US organizations and $ 12 billion for Canadian firms (Rhodes & Steers, 1990). In Germany, absence cost industrial firms more than 31 billion Euros each year
3 pages (750 words)Essay
Macroeconomics: Production Costs
Every business organizations engaged in transformation of inputs into finished products incurs certain specific costs. Costs of producing a commodity is influenced by the cost of technology used, resources applied, as well as the costs of inputs employed in the production process, and are inevitable and usually included within commodity prices.
15 pages (3750 words)Term Paper
Supply: Production, Costs, and Profits
Basically, a company can realize two types of economies of scale according to Alfred Marshall namely internal and external economies of scale. Internal economies of the scale are realized when a firm increases its production and reduces its cost. External economies of
2 pages (500 words)Essay
Supply: Production, Costs, and Profits
Variable cost: These costs are comprised of all the cost which a business firm can change deliberately. They involve all the inputs or
4 pages (1000 words)Essay
Financial projections (revenues, costs, anticipated net profit)
All these costs will be incurred at the start of the business. Nonetheless, advertisement and promotional costs will ripple across the months. Initially, large sums of funds will be directed towards advertisement but will decrease as the
1 pages (250 words)Essay
It is imperative to identify that there are some inputs that are not divisible. Essentially, these are inputs that cannot be splinted into smaller units. Apparently,
3 pages (750 words)Essay
unit of output first falls at a declining rate, slows down and then starts rising at a rising rate. Hence the total variable cost curve is shaped like a tilted “s”. The fixed cost is simply a horizontal straight line and adding these two, the firm’s total cost curve is obtained. It is shown in the diagram below. Figure 1: Variable, Fixed and Total Costs Revenue and output A firm’s total revenue is simple equal to the number of units sold times the price of the product. If P be the per-unit price and q be the number of units sold, then the total revenue (TR) is simply pq. Now, quantity of output, q has two channels of affecting the revenue. First, if q rises, given p, total revenue rises. However, as q rises, by the law of demand, the market price, p falls. Therefore, TR tends to drop. Whether a price change results in a rise or fall in total revenue actually depends upon the price elasticity of demand of that product. However, that topic is beyond the scope of the present discussion. We proceed by making the simplifying assumption that the producer operates in a competitive market so that the market price does not depend upon changes in q (recall that a perfectly competitive producer is a price taker). Thus, with given p, total revenue becomes proportional to quantity of output and therefore can be represented by a straight line with a positive slope and zero intercept. Figure 2: The total revenue curve The production decision As briefly mentioned in the introduction, the producer’s objective is to maximize its profits, i.e., the difference between total revenue and total costs. The discussion above implies that this boils down to identifying the


Costs, Revenues and Production Decisions Introduction A firm’s production decision is critically dependent upon its revenue and costs. In particular, the firm’s objective is to maximize its profits. This involves identifying the level of output that maximizes its profits…
Costs, Revenues and Production Decisions
Read TextPreview
Comments (0)
Click to create a comment or rate a document
Let us find you another Essay on topic Costs, Revenues and Production Decisions for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us