Economics

Economics

1- Demonstrate how metrics such as valuation, economic profit, and related terms are measured and evaluated.

Economic profit is a gap between opportunity cost and total business revenue. If a business gets an economic profit, then consumer is utilizing more on a product than society (the resource owners) are sacrificing to manufacture the product.

Monopolistic competition is suitable economic structure for Auto edge co. The valuation, economic profit and other related variables can be measured and evaluated in the following way.

A monopolistic competitive is supposed to manufacture the quantity of production that economic profit touches its maximization i.e.| the difference between the total cost (TC) and total revenue (TR). Economic profit will directly affect due to this manufacturing choice having profit, by recognizing utmost gap among the total cost and total revenue, or through the equal opportunity among MR and MC.

Measurement and evaluation

Production with profit maximizing is such manufacturing stage which attained the maximum level of profit stated open market situation and manufacture cost. For an Auto Edge company which falls under monopolistic competitive firm, this requires regulating the price and matching manufacture level to attain the preferred match between total revenue and total cost.

Three analyses

Profit-maximizing production is recognized in one of three directions. Directly with profit, with an evaluation of total cost (TC), and total revenue (TR) and with comparison of MR and MC.

This demonstration states how it is recognized for a monopolistic competitive firm, such as that managed by Auto Edge Company, a renowned monopolistic competitive supplier of Delux automotive company, attracts many consumers due to its best goods and services. Auto Edge is one of many firms that manufacture similar products and Automotive Parts, it means that it is facing comparatively elastic demand curve negatively-sloped.

Profit curves are shown above. The main point part shows net revenue (TR) and net cost curves (TC). Marginal revenue (MR) and marginal cost (MC) curves are shown in the bottom panel. In all three approaches, Auto Edge makes the most of profit when manufacture six automotive parts. Let have a look over one by one.

Profit: Firstly, Optimal profit can be demonstrated with profit evaluation. The profit is at an optimal level if the profit curve is at its apex. At the top, profit curve is achieved the top most level by producing six automotive parts. Profit will be at less at other output points.

Total Revenue (TR) and Total Cost (TC): Secondly, optimal earnings is recognized by an evaluation of Total Revenue (TR) and Total Cost (TC). The weight age of production that attains the huge margin of Total Revenue (TR) over Total Cost (TC) is optimal profit. In the center panel, the perpendicular space between the curves i-e total revenue and total cost is the highest at six Automotive Parts.

Marginal Revenue (MR) and Marginal Cost (MC): Thirdly, maximization of profit can be recognized by an evaluation of marginal revenue (MR) and Marginal Cost (MC). The income is not improved by altering the level of output if Marginal Revenue (MR) is equivalent to Marginal Cost ...