AP Microeconomics / Unit 3: Production, Cost, and the Perfect Competition Model
3.5 Profit Maximization
Notes
Every firm maximizes profit by producing where MR = MC.
- Profit $=(P-ATC)\times Q$.
Practice
At the current output, MR = 12 and MC = 9. The firm should:
Each extra unit adds profit.
$P=20$, $ATC=15$, $Q=100$. Profit:
$(20-15)\times100$.
The profit-maximizing rule for all market structures:
Marginal decision.
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