Primary goal of any firm - to earn the most profit possible from the sale of its goods or services.
Income earned by firms. (Profit = TR - TC)
π (Pi sign)
π is used to symbolize profit. (π = TR - TC)
Revenue per unit produced. (AR = TR/Q) NOTE: AR always equals Price.
The extra revenue earned from producing an extra unit of a good. The change in total revenue divided by the change in quantity. (MR = change TR/change Q)
MR = MC Rule
The guide by which firms maximize profit (or minimize loss.)
When a firm faces the certainty of incurring losses, its goal is to incur the lowest loss possible with the production of its goods and services.
Ceasing operations - the firm's loss minimization occurs at zero output.