Explain Why a Firm Maximizes Its Total Profits by Producing

question 25

Essay

Explain why a firm maximizes its total profits by producing where MC = MR.To answer this question completely,you should explain why output levels greater than and less than the level where MC = MR do not maximize profits.

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Definitions:

Cash-flow Method

A financial analysis approach that evaluates an investment's profit or loss by considering the timing and amount of cash inflows and outflows.

Business Valuation

A process and a set of procedures used to estimate the economic value of an owner’s interest in a business.

Profit Potential

The capacity or likelihood for a business venture to generate earnings over costs.

Balance Sheet Method

A financial accounting strategy for valuing assets or determining net worth by comparing what is owned to what is owed.