MIKE FLADLIENMUSCATINE HIGH SCHOOL

Profit Max and Production Function

Marginal ProductThis is the data we used in class. I have replicated here for reference.

The change in the quantity of total product resulting from a unit change in a variable input, keeping all other inputs unchanged. Marginal product, usually abbreviated MP, is found by dividing the change in total product by the change in the variable input. Marginal product, which occasionally goes by the alias marginal physical product (MPP), is one of two measures derived from total product. The other is average product.

See AmosWEB.com

Cost DataAssume that Fixed Costs are $10 and the firm can hire all of the labor it wants at $10. The costs are summarized in the table

A fixed cost --In general, cost that does not change with changes in the quantity of output produced. More specifically, fixed cost is combined with the adjectives "total" and "average" to indicate the overall level of fixed cost or the per unit fixed cost. Fixed cost is incurred whether of not any output is produced. The contrast to fixed cost is variable cost, cost which does change with the quantity produced.

MC = delta TC divided by delta Q

Total Revenue/Cost

To find profit, pi, subtract total cost from total revenue

Observe that profit is maxed at 20 units.

Graph of Total Revenue

Where is the distance between total revenue and total cost the greatest?

Profit Max

Note that MC equals MR at 20 units

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