Achievement of Maximum Profit - Essay Example

Comments (0) Cite this document
The author states that for achieving maximum profits firms have to sell its products at the maximum price customers are willing to pay. Profit maximization requires that all means to lower the average cost of producing the current output with the current facility must have been exhausted…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.8% of users find it useful

Extract of sample "Achievement of Maximum Profit"

Maximum profits means that profits are as large as current market conditions allow. To achieve maximum profits firms have to sell its products at themaximum price customers are willing to pay. Profits equal total revenue minus total variable costs minus total fixed costs. Maximum profits implies finding the level of Q for which (AR-AVC) is as large as possible. At zero output a firm’s total cost equals its fixed costs. Variable costs are higher when companies increase its total output. Two common variables costs are materials and labor costs. With increasing output levels companies are able to make more effective use of its facilities and staff. When companies utilize their equipment more extensively maintenance and repairs costs increase. Companies that increase their labor shifts incur in higher labor costs.
Average total costs equals total costs divided by quantity. The average total cost curve is U-shaped. Subtracting average fixed costs is the formula for average variable cost. The AVC curve lies vertically below the ATC curve by the amount of the AFC. The ATC and the AVC curve never touches because the AFC never falls to zero. The total variable cost is measured by the vertical distance between the horizontal TFC lines. The AVC curve bottoms out at a lower level for Q than does the ATC curve. The marginal costs measures the increase in total cost as output Q increases by one unit. Marginal cost is less than both average total cost and average variable cost. Due to the fact that marginal costs is less than both average total cost and average variable cost the ATC and AVC falls. The ATC and AVC falls because the MC. The marginal cost curve cuts through the AVC curve at the bottom of the AVC curve. The MC curve cuts through the ATC curve at the bottom of the ATC curve.
The ATC, AVC, and MC curves are all U-shaped. The vertical gap between AVC and ATC curves steadily diminishes as Q increases. These curves never touch. Businesses have options available with respect to how much output they want to be able to produce. Economies of scale help organizations reduce their costs. Larger scale operations have higher administrative expenses. Economies of scale help reduce administrative costs. When companies incur in diseconomies of scale their operating costs rise. The LRATC curve shows the lowest average total cost at which any given level of output can be produced. The LRATC curve is made up entirely of points on the firm’s alternative ATC curves. A way to reduce the ATC curve is by changing the rate of output to one at which the existing facility can operate more efficiently. Another way to reduce ATC is by changing to a more cost efficient facility by changing its scale and technology mix. Profit maximization requires that all means to lower the average cost for producing the current output with the current facility must have been exhausted. Read More
Cite this document
  • APA
  • MLA
(“Achievement of Maximum Profit Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Achievement of Maximum Profit Essay Example | Topics and Well Written Essays - 500 words. Retrieved from
(Achievement of Maximum Profit Essay Example | Topics and Well Written Essays - 500 Words)
Achievement of Maximum Profit Essay Example | Topics and Well Written Essays - 500 Words.
“Achievement of Maximum Profit Essay Example | Topics and Well Written Essays - 500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Achievement of Maximum Profit

Achievement Gap

...? Achievement Gap Task: Achievement Gap There are varied socioeconomic characteristics given the disparity in income levels among people. Parents’ socioeconomic status is a significant determinant of the level of educational achievement of children. The rising inequality in the income, being a measure of socioeconomic status, of parents has consequential effects on the education, and ultimately, performance of children. Apparently, there are notable differences in academic performance between students from low and high socioeconomic status families. Noteworthy is the fact that the disparity continues to widen, despite a number of measures geared at narrowing the phenomenon. In addition,...
4 Pages(1000 words)Coursework

Goal Achievement

... Goal Achievement December 18, 2005 Goal Achievement This incident relates to the days when I was in my high school and was a representative leading the class in various sports competitions, athletics, elocutions and also in other extra curricular activities such as music competitions. A challenging task that I can recall was leading Woodwind Quintet team consisting of a group of disorganized, naive and timid individuals in a major musical competition called Music Festival and of course winning the competition. Playing in a group required us to have a complete mutual understanding of each other's style of playing, strengths and weaknesses. Our music teacher Mr. Gavlik was against our participation since he felt that we would... Goal...
2 Pages(500 words)Essay

Profit Maximization

...of the projects of the company is to save the existence of skylarks from the decline on its population. It was able to work with other agencies to promote the rehabilitation of the bird specie, an action that clearly goes beyond the idea of profit maximisation. Objectives of organizations transcends far beyond the system of profit maximisation. What governs organizations actually is sustainability and responsible business practices. Contributions for community welfare are seen as part of operational success and it is the thing that organizations pride as an achievement. In the automotive industry, sustainability is remains to be the primary guideline for company operations. The Daimler...
10 Pages(2500 words)Essay

Profit declining

...) any group or individual who can effect or is effected by the achievement of the organization's objective. As the employees are aware of the competitive business environment and its pragmatic repercussions on the gross and net profits of their boss, they shall certainly induce and develop a soft corner in their hearts. They shall understand their dear Costlo's depressions and aspirations. After all they have been enjoying and utilizing enormous fringe benefits from Costlo and his company over the years. These benefits are reaped and in turn their Kith and kin also benefited. As it shows that the company is paying more medical benefits that is to say that 30% more than their largest...
5 Pages(1250 words)Essay

Achievement Motive

...Achievement Motive 1 Introduction If Madruga is to succeed in Singapore, or in any other country for that matter, it cannot approach employee-employer relations, or the entire paradigm of HRM from an American perspective. Instead, and even though the aforementioned will ultimately be informed by the home country’s culture and the organisational culture which it gave rise to, it needs to be tempered with the host country’s culture and the worldviews which colour and determine the local workforce/domestic employees’ attitudes towards work. This extends to the management of employee behaviour and the strategies deployed for the maximisation of employee motivation levels. With specific focus on whether or not knowledge...
8 Pages(2000 words)Essay

Achievement Gap

...A Research Project on Achievement Gap s Table of Content 0 Introduction 3 2.0 Literature review 4 3.0 Research methodology 6 3.1 Research methods 6 3.1.1 Secondary research 6 3.1.2 Primary research 6 3.2 Data collection plan 7 3.3 Ethical issues in the research 8 3.4 Summary of the chapter 8 4.0 Findings of the field study 8 4.1 Achievement gap in the two selected schools 9 4.2 Likely causes of the achievement gap 11 4.3 Effective solutions to bridging the achievement gap between Hispanics and Whites 12 5.0 Conclusion 13 References 15 1.0 Introduction The issue of achievement gap in regards to the educational performance of students in learning...
12 Pages(3000 words)Research Paper

Economic Profit

...Economic Profit Question Added value = value of products or services – cost of producing such products or providing the services Microsoft Added value = value of output – wages and salaries – cost of materials – cost of capital Added value = 2,750 – 400 – 1,650 – 40 Added value = $660 Barclays bank Added value = $5,730 – 3,953 – 916 – 556 = $305 General Motors Added Value = 50,091 – 29,052 – 15,528 – 7,507 = -$1996 Question 5 Economic profit is a better measure of profit than accounting profit because it considers opportunity cost and other hidden costs which are ignored by accounting profit (Black, 2003). Economic profit is positive if...
1 Pages(250 words)Essay

Achievement Gap

... The achievement gap is the difference that exists between different students from different ethnicity. These students may include students from White, Hispanic, Black, American Indian/ Alaska Native and Asian/ Pacific Islander ethnicities. There is a major performance gap between students from these ethnic backgrounds. The differences in their performance are mostly measured through their classroom based average scores. I believe the achievement gap exists for many reasons. The first reason for this gap is the economic status of these students. Economic status is important in order to provide the recourses for the students. The lack of recourses at home effect students’ performance in a negative...
1 Pages(250 words)Essay

Profit maximisation

...PROFIT MAXIMISATION PROFIT MAXIMISATION IN DIFFERENT MARKET STRUCTURES As applied in economics, profit maximisation refers to the long run or short run process by which the firms in the market determine the output level and price at which they would make the greatest profits. While firms strive to maximise their total revenues and minimise the total costs, total profits reach their maximum when the marginal revenue equals the marginal cost (Baumol and Blinder, 2012). Profit Maximisation for pure monopoly A pure monopoly exists in the market when there is only one seller of a product with no close substitutes (Baumol and...
2 Pages(500 words)Essay

Ensuring Maximum Body Gains

...Fitness Plan and Workout Health and fitness have become a field of concern in recent years upon the realization of the probable health damage associated with different lifestyles. The field has received extensive scholarly research with contrasting views on the approaches to healthy living. As such, it is imperative to develop a comprehensive discourse which critically analyzes all aspects of nutritional management in the proposed fat-loss program, and provides a template of understanding nutrition and human physiology. Thus, the purpose of the study is to review the client’s medical and nutritional history and to relate findings with research on optimum food combinations and various training programs which would ensure...
12 Pages(3000 words)Case Study
sponsored ads
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.

Let us find you another Essay on topic Achievement of Maximum Profit for FREE!

Contact Us