Howdocompanysusesystemsofequations
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The document discusses how companies use systems of equations to maximize profits. It explains that profits are maximized when marginal revenue equals marginal cost, identifying the quantity and price at this point. The document also notes that average total cost is minimized when it equals marginal cost, and discusses how a vertical line representing optimal production quantity intersects the demand curve.
Howdocompanysusesystemsofequations
- 1. How do company’s use Systems of Equations? Begin Page 424 in Textbook
- 2. A company’s profits are maximized when marginal revenue = marginal cost. Locate this point on the graph. What is the quantity produced (600) and the price of the item ($6) when profits are maximized? Next Slide
- 3. A company’s profits are maximized when marginal revenue = marginal cost. Locate this point on the graph. What is the quantity produced (600) and the price of the item ($6) when profits are maximized? Next Slide
- 4. A company’s profits are maximized when marginal revenue = marginal cost. Locate this point on the graph. What is the quantity produced (600) and the price of the item ($6) when profits are maximized? Next Slide
- 5. When the average total cost is at a minimum, it should equal the marginal cost. Is this true for the graph shown? Explain how you know. Yes. The two graphs intersect at the vertex of the average total cost graph. Next Slide
- 6. When the average total cost is at a minimum, it should equal the marginal cost. Is this true for the graph shown? Explain how you know. Yes. The two graphs intersect at the vertex of the average total cost graph. Next Slide
- 7. Notice the vertical line that represents the production quantity at 600 items. It intersects all four graphs. Locate the point at which this vertical intersects the demand curve. If the company produces more than 600 items, will the demand for the product increase or decrease? What do you think?
- 8. Notice the vertical line that represents the production quantity at 600 items. It intersects all four graphs. Locate the point at which this vertical intersects the demand curve. If the company produces more than 600 items, will the demand for the product increase or decrease? What do you think?