I. Introduction II. Demand Determines Marginal Revenue. III. Maximizing Profit Using Marginal Analysis IV. Maximizing Profit With Total Revenue & Cost  V. Minimizing Short-Run Loss, Close Down VI. Economies and Diseconomies of Scale VII Long-Run Costs and Profit VIII. Predicting Profit with Break-Even Analysis     IX. Is U.S. Free Enterprise Working Please link to, use to educate, Share! Return to Economics Internet Library   3/3/19
 I. Introduction     A. Profit equals total revenue minus total costs.     B. Understanding profit requires bringing          revenue and costs together.     C. Total profit and profit on the margin will be          analyzed.  II. Demand Determines Marginal Revenue.      A. Marginal revenue (MR) is the change in          total revenue which is received from selling          one more unit.       B. Demand may be thought of as average          revenue with what is happening on the          margin an indication of what is happening          to the average.      C. When product demand is downsloping,           marginal revenue is below demand           indicating the average price received falls           as quantity increases.      D. Imperfect Competition MR Less Than Demand      E. The special case of horizontal perfectly elastic          demand will be explored in chapter 23.   III. Maximizing Profit Using Marginal Analysis         A. Selling quantity Q will maximize profit.        B. At quantities below optimum point Q, MR exceeds            MC and increasing quantity sold will increase profit.        C. At quantities above point Q, MC exceeds MR and an             increase in quantity sold will decrease total profit.        D. Maximum profit results when MR = MC        E. To find total revenue (TR) draw a perpendicular line             from the intersection of MR and MC to the quantity             axis. Then extend the line up to the demand curve             and over to the y-axis. The resulting rectangle is              P x Q which equals total revenue.        F. To find TC draw a line from the intersection of the             perpendicular and ATC to the y-axis. The resulting             rectangle is ATC x Q which is total costs.    G. The resulting top rectangle is TR-TC. It is total profit. `IV. Maximizing Profit with Total Analysis of Revenue & Cost `        Total Revenue = Price x Quantity       Total Costs = Total Fixed Costs + Total Variable Costs       Total Profit = Total Revenue - Total Costs       Maximum profit is where the vertical distance between       TR and TC is the longest. Many Seek an Advantage and Excess Profit     At high prices, demand is inelastic, lowering price   increases total revenue as marginal revenue is positive.   At medium prices, unitary elasticity means no change   in total revenue as price is changed.     At low prices, demand is elastic, lowering price   decreases total revenue as marginal revenue is   negative.
 V. Minimizing a Short- run Loss Versus a Short- run Close Down      A. TR1 is making a profit.      B. TR2 is paying all variable costs and making some            contribution to fixed costs. Cash flow may be            positive as fixed costs such as depreciation,            though an expense, have been paid. This level            of total revenue is all that is necessary to continue            in business during the short run.      C. TR3 is not covering all variable costs and not            contributing to fixed costs. This situation requires            that the firm shut down very quickly in the short run           as each unit produced adds to total loss. Econ Concepts Video in in 60 Seconds,The Shut Down Rule Editors Note: Video uses marginal analysis, this analysis uses total analysis. Our Free Internet Libraries improve grades and careers. VI. Economies and Diseconomies of Scale Affect Profit.       A. Companies try to maximize profits by designing           production facilities that increase the number of           units produced before the diseconomies of scale          begin to rapidly increase costs.      B. Flexible production lines, designed by the           Japanese and being used by companies such as          General Motors, allow for producing different           product models and even different products           without substantially changing a production           line's configuration. These procedures have          become a popular method of increasing a          plant's economies of scale. US adjusted to maximize profit by becoming a lean production machine. The Economist Magazine 5/4/13
 Efficiency Keeps Job Growth Down Increase % Increase Relative Change 98,000 jobs 544% \$196.32 billion 1016% Sales increased almost twice jobs. \$43.7 billion 2196% Profits increased about four times jobs \$231.2 billion 3618% Cash increased about six times jobs Unlike other comparisons, maintaining margin with growth can be difficult 10.1 % points 35% \$9.33 billion 1314% R&D increased more than twice jobs. Source: @WSJ;  Read full article
 VII Long-Run Costs and Profit      A. Long-run average total costs are           the horizontal summation of ever           larger short-run average total costs.     B. Sustainable growth of the U.S and Incremental Capital Output Rate C. Proof That Managing for the Long-term Increases Profit
 VIII. Predicting profit with break-even analysis         A. Darin Jones has decided to open a  fully automated  car wash with              Linda Smith, a friend from college. Speedy Car Wash would be fully             automated with annual fixed charges for costs such as depreciation              and rent amounting to \$100,000. Variable costs such as labor were             expected to be \$2.00 per vehicle washed. Price was expected to             average \$7.00 per vehicle and they plan to wash 30,000 cars per year.             The expected first-year profit for Speedy Car Wash would be calculated              as follows.          B.  Total Profit = Total Revenue - Total Costs                                 = P x Q - ( TFC + TVC)                                 = P x Q - TFC + VC/unit X Q                                 = (\$7/u) X 30,000u - (\$100,000 + \$2 X 30,000u)                                 = \$210,000 - (\$100,000 + \$60,000) = \$50,000          C. Oil Shale Production, Breakeven and Marginal Costs,  Moving the Goalposts

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The Dark Side of  Thomas Jefferson

A new portrait of the founding father challenges the  long-held perception of Thomas Jefferson as a benevolent slaveholder.

... "The very existence of slavery in the era of the American Revolution presents a paradox, and we have largely been content to leave it at that, since a paradox can offer a comforting state of moral suspended animation. Jefferson animates the paradox. And by looking closely at Monticello, we can see the process by which he rationalized an abomination to the point where an absolute moral reversal was reached and he made slavery fit into America’s national enterprise."...

"The critical turning point in Jefferson’s thinking may well have come in 1792. As Jefferson was counting up the agricultural profits and losses of his plantation in a letter to President Washington that year, it occurred to him that there was a phenomenon he had perceived at Monticello but never actually measured. He proceeded to calculate it in a barely legible, scribbled note in the middle of a page, enclosed in brackets. What Jefferson set out clearly for the first time was that he was making a 4 percent profit every year on the birth of black children. The enslaved were yielding him a bonanza, a perpetual human dividend at compound interest. Jefferson wrote, “I allow nothing for losses by death, but, on the contrary, shall presently take credit four per annum, for their increase over and above keeping up their own numbers.”  His plantation was producing inexhaustible human assets. The percentage was predictable."

We can be forgiven if we interrogate Jefferson posthumously about slavery. It is not judging him by today’s standards to do so. Many people of his own time, taking Jefferson at his word and seeing him as the embodiment of the country’s highest ideals, appealed to him. When he evaded and rationalized, his admirers were frustrated and mystified; it felt like praying to a stone. The Virginia abolitionist Manicure Conway, noting Jefferson’s enduring reputation as a would-be emancipator, remarked scornfully, 'Never did a man achieve “Never did a man achieve mo re fame for what he did not
do.' ”
smithsonianmag.com

Largest Advanced Manufacturing Firms by Revenue

 National Eighth District 1 Apple (3342) Emerson Electric (335) (St. Louis, Mo.) 2 Johnson & Johnson (3254) MilliporeSigma (3254) (St. Louis, Mo.) 3 Gilead Sciences (3254) Energizer Holdings (3359) (St. Louis, Mo.) 4 Intel (3344) Hillenbrand (3339) (Batesville, Ind.) 5 Cisco Systems (3342) American Railcar Industries (3365) (St. Charles, Mo.) 6 General Motors (3361) Esco Technologies (3345) (St. Louis, Mo.) 7 General Electric (335) FutureFuel (3251) (Clayton, Mo.) 8 Amgen (3254) Kimball Electronics (3344) (Jasper, Ind.) 9 Pfizer (3254) Escalade (3399) (Evansville, Ind.) 10 Exxon Mobil (3241) Sypris Solutions (3363) (Louisville, Ky.)

SOURCE: Compustat.

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