Economists defend their position that says that where the marginal revenue and the marginal cost cross is the optimum point of production, defending this though saying that inside the marginal cost a small level of normal profits are included because no one will decide to produce something without knowing in advance that will be earning some money (as part of the costs the “salary” of the producer will be added).
Now, lets see business people’s idea, they say that after the minimum number of units that allow you to cover the total cost is reached then you can start out talking about making profits (winning money). And this makes sense too, if my total costs are equal to $ 2,000.-, I need to find out the number of units I have to sell in order to equal (through the revenue) that previous value.
For example if I find that producing and selling 500 units of an X product I obtain $ 2,000.-, then I know that whenever I sell my unit number 501 I’ll star making profits.
It makes sense, but it's nice to see that students still argue about this point.
See you on my next post
Prof. Lic. Fernando Julio Silva, MSc
July 2008
Now, lets see business people’s idea, they say that after the minimum number of units that allow you to cover the total cost is reached then you can start out talking about making profits (winning money). And this makes sense too, if my total costs are equal to $ 2,000.-, I need to find out the number of units I have to sell in order to equal (through the revenue) that previous value.
For example if I find that producing and selling 500 units of an X product I obtain $ 2,000.-, then I know that whenever I sell my unit number 501 I’ll star making profits.
It makes sense, but it's nice to see that students still argue about this point.
See you on my next post
Prof. Lic. Fernando Julio Silva, MSc
July 2008
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