The purpose of manufacturers to produce or sell goods is to earn profits. Profit maximization is a way for manufacturers to maximize profits by using various sales methods.If the total income is greater thantotal costThere will be surplus, which is profit.It is worth noting that the profit mentioned here does not includeNormal profitThe normal profit is included in the total cost. The profit here refers toExcess profit。IfTotal revenueIt is equal to the total cost. The manufacturer only gains normal profit without loss. If the total profit is less than the total cost, the manufacturer will suffer a loss.
Manufacturers engaged in the production or sale of goods require not only profits, but also maximum profitsPrinciple of profit maximizationIs the outputMarginal revenueEqual to the principle of marginal cost.Marginal revenue is the revenue increased by the final increase of one unit of sales volume, and marginal cost is the cost increased by the final increase of one unit of production.If the marginal revenue of a unit of output is greater than the marginal cost, it means that the total profit can be increased by increasing the output, so the manufacturer will continue to increase the output to achieve the goal of maximum profit.If the marginal revenue of the final increase of one unit of output is less than the marginal cost, it means that the increase of output will not increase profits, but will lead to losses. In this case, in order to achieve the goal of maximum profits, manufacturers will not increase output but reduce output.Only when the marginal revenue equals to the marginal cost can the total profit of the manufacturer reachmaximum value。Therefore, MR=MC becomes the condition of profit maximization, which is applicable to all types of market structures.
The ultimate goal of an enterprise is to maximize profits. There are many factors that affect it. One is to expand product revenue. Profits are generated by revenue. Without the guarantee of revenue, profits areNo way to startOf.Second, strictControl costsandExpensesAs profits increase, the less costs and expenses are spent, the greater profits will be.
