A SIMPLE EXAMPLE OF PROFIT MAXIMIZATION

Let’s begin our analysis of the firm’s supply decision with the example in Table 2. In the first column of the table is the number of gallons of milk the Smith Family Dairy Farm produces. The second column shows the farm’s total revenue, which is $6 times the number of gallons. The third column shows the
farm’s total cost.Total cost includes fixer costs, which are $3 in this example, and variable costs, which depend on the quantity produced.

 

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