Profit for Levys Jeans

1
Profit for Levys Jeans
Next, Levy can calculate his profit. Profit
equals total revenue minus total cost. At very
low quantities and a high quantities, Levy incurs
a loss, since its cost exceed its
revenue Assuming that Levy wishes to maximize
profits, he chooses the quantity where total
revenue minus total cost is the greatest. In
this example, profit maximization is at Q 6
jeans per day.
Assume Levy Jeans operates in a perfectly
competitive market, where there are a large
number of sellers of identical products. Assume
that jeans are a perfect substitutes (no brand
names, etc.) Assume that the market price is 34
per jeans. Levy takes this price as given and can
sell all the jeans they want at this price. Below
is his total revenue schedule.
Total Revenue Total Cost
TC
loss
TR
Below is the total cost of production for Levy
Jeans. TC is a combination of the fixed and
variable cost of production.
profit
loss
Total Revenue (TR)
Total Cost (TC)
Quantity (Q)
Profit (TR TC)
0 1 2 3 4 5 6 7 8 9 10
50 60 65 75 92 114 144 182 240 315 410
0 34 68 102 136 170 204 238 272 306 340
-50 -26 3 27 44 56 60 56 32 -9 -70
Quantity/day
Profit
Profit
Quantity/day