Aggregate demand and supply, and macroeconomic problems - Unemployment
3 important questions on Aggregate demand and supply, and macroeconomic problems - Unemployment
How does a firm maximize its profit?
By changing output, and to do that it compares the Marginal Revenue and the Marginal Cost of each succesive unit of output. Extra output only occurs if marginal revenue of that output exceeds marginal costs.
What point does the MC = MR rule indicate?
The point at which the economic profit is the highest, when cost equals revenue.
What is the price exceeds the AVC but not the ATC? What does MR=MC do?
It minimizes losses, because it still covers the fixed costs.
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