The principle of maximizing the result of activities assumes that. Salov A.I. Economics Principles of profit maximization. What is profit maximization for a firm

Profit maximization. The principle of profit maximization is that firms plan their activities for the coming period, trying to maximize the size of profits in this period, or at least minimize losses. Determination of the optimal volume of production from the point of view of the greatest profit is carried out using two methods: the method of comparing gross indicators and the method of comparing the limit indicators. The application of these methods presupposes the assumption that only the sales price of products and the volume of production are optimized (all other parameters remain unchanged) in the period under consideration is equal to the volume of sales.

Gross comparison method involves the calculation of profit at different values of the volume of production and sales of products by deducting the sum of the total (gross) costs TS of total income (gross revenue) TR (eng. Total revenue). Total income is calculated by multiplying the quantity of products sold Q by its market price R:

The optimal volume of production and sales is defined as the maximum amount of profit:

Limit comparison method... When optimizing using the method of comparison of marginal indicators, the marginal costs of the MC and the marginal revenue MR (eng, marginal revenue) are used. Marginal revenue is understood as a change in the company's revenue as a result of a change in the amount of sales:

Until the value of the marginal income ( additional income per unit of output) exceeds the value of marginal costs (additional costs for the same unit of output), an increase in production and sales increases profits. The optimal value of the volume of production and sales is achieved when marginal costs become equal to marginal income. With a further increase in the volume of production, the amount of additional costs will exceed the amount of additional income per unit of output, the profit will decrease.

16. The efficiency of competitive markets. Market power

Efficiency competitive markets consists in the distribution of the limited amount of resources available to society in such a way as to maximize the satisfaction of needs. Production efficiency means that each item in the manufactured product is produced in the least expensive way. A competitive market forces firms in the long run to conduct production at the lowest average cost.

Efficiency of resource allocation takes place when it is impossible to change the structure of aggregate production in such a way as to obtain additional net benefits for society. The market mechanism allows resources to be allocated in such a way as to produce aggregate products, the composition of which best suits the preferences of consumers.

This means that the marginal cost of production of a product measures the price of goods, cat. could be produced using the resources used in the production of a unit of this product. Equality of price to marginal cost ensures efficient allocation of resources.

Limited market of pure (perfect) competition connected with the word. problems, cat. they are not allowed to:

1. The market system does not regulate the distribution of income at all, cat. can be "uneven, lead to the production of costly trifles for the rich, denying the poor their basic needs.

2. There are costs, cat. manufacturers try to avoid. For example, production can pollute environment... In this case, the costs are borne by society, they are called collateral, or external. Some benefits, such as vaccinations that prevent epidemics, bring benefits to the whole society. They are called external or collateral. But the market system ignores both externalities and the production of public goods, for example, education of the population, defense.

3. The range of consumer choice in a purely competitive environment is relatively small, since pure competition is possible only in markets that operate with standardized products.

Market power- this is the ability to dictate prices in the market, it is absent in conditions of pure competition. Market power is to some extent inherent in all markets with imperfect competition, such as markets of monopolistic competition, oligopoly, it is typical of monopoly.

The fact that dynamic differences in resource prices are removable, and equilibrium differences can exist for a long time, allows us to formulate the so-called the principle of maximizing the overall benefit. According to this principle, the owners of the factors of production choose the way of using their resources that provides them with the maximum overall benefit. The general benefit is understood as both monetary and non-monetary rewards and benefits. The principle of maximizing the total benefit is often interpreted as the principle of equal overall benefit, which can be formulated as follows: due to mobility economic factors the elimination of dynamic differences in the prices of resources leads to the equalization of the total benefits obtained from the use of these factors in various spheres of production. In other words, all units of any resource will be distributed among their users in such a way that the owners of the factors of production receive an equal overall benefit regardless of the scope of the resource. The principle of maximizing the total benefit is universal, and plays in the theory of income distribution the same role as the principle of maximizing profit in the theory of production of goods and services.

Although non-monetary goods have a significant impact on the prices of inputs, primarily labor, they are not subject to significant changes over time. In this regard, the share of non-monetary benefits in the total benefit can be considered stable. Then the main reason for the change in the total benefit is the monetary reward received by the owners of economic resources; this remuneration is influenced by the state of the market for factors of production. The owner of any economic resource will strive to expand the offer of his services in those industries where the payment for a unit of the resource is higher, since he will receive a higher profit there.

So, the amount of a resource that its owner will offer on the market for factors of production ( QS resource) is determined by the total benefit received by the owner of the resource as a result of the use of resources in the production process. The total benefit, in turn, depends on the price of the resource, therefore, we can find the dependence QS resource on its price, i.e., determine the supply of the resource and build its supply curve. Since an increase in the price of a factor of production leads to an increase QS, the resource supply curve has the familiar “ascending” form. Note that changes in other factors affecting QS resource (qualification, non-monetary benefits, the cost of improving the quality of the resource), affect in general the supply of the resource, lead to shifts in its supply curve.

The existence in the economy of a huge number of firms, differing from each other in the volume of output, the nomenclature of manufactured products, the number and qualifications of hired workers, energy and capital-labor ratio, complicates the task of studying the situations of firms' behavior in the markets. In this regard, McConnell K.R., Bru S.L. in the course "Economics" proceed from several fundamental principles the behavior of the firm. One of them is the principle that any firm seeks to take in production activities such solutions that would provide her with the highest possible profit. At the same time, one proceeds from the importance of the "profit" category in the activities of any firm, as well as from the ability to operate with specific facts, indicators in its practical activities, and scientifically substantiate its decisions.

Since most producers are characterized by the behavior of maximizing firms, it can be assumed that producers, within the limits of their costs, seek to maximize profits.

Profit maximization is achieved when marginal costs and marginal revenue are equal: MR = MC. The enterprise will need such a number and ratio of factors of production at market prices, which are required to produce products within the equality of MC and MR.

If the firm as a result of its activities fully covers the opportunity costs, then there was no more profitable alternative use the resources it uses. The situation when income is equal to costs, that is, economic profit is zero, is quite satisfactory for the firm, since the resources used bring benefits no less than their use in an alternative way. Consequently, positive economic profit is achieved when the inputs of production bring more benefits than what they would bring in the case of applying the best alternative method. If the opportunity cost exceeds income, that is, the economic profit is negative, the firm incurs a loss. Thus, the presence of economic profit means that the firm uses resources most efficiently. It is economic, not accounting, profit that is the criterion for the success of an enterprise. Its presence or absence is an incentive to attract additional resources or use them in other areas.

Striving to get as much profit as possible is at the heart of the concept of profit maximization.

The maximum profit according to this concept is achieved through the interaction of internal and external factors activities of the company. The main requirement for maximizing profit is making a profit from each unit of output. Therefore, the analysis of factors affecting profit is associated with the concepts of marginal (MR), average (AR) and total (TR) income.

Under the marginal income is understood the change in the total (total) income of the firm, caused by the sale of one additional unit of production.

Average is the income received per unit products sold.

The release of each additional unit of output increases the volume of production and marginal cost. However, at the same time, the total income of the firm rises to the marginal level. The excess of the amount of marginal income over marginal costs indicates that the marginal maximization of profit by the firm has not yet been achieved, which means that it can still increase the volume of production. The excess of marginal costs over marginal income leads to a decrease in the total income of the firm, which becomes unprofitable.

Profit maximization is achieved with such a production output when the marginal revenue of the firm is equal to the marginal cost.

Consequently, a firm seeking to maximize profits must comply with two universal rules that apply to any market structure.

Rule 1. A firm can continue its activities if, at the achieved level of production, its income is greater than variable costs, and must stop production if its total income does not exceed variable costs.

Rule 2. In order to optimize the volume of output, the firm must produce such a quantity at which the marginal revenue (MR) is equal to the marginal cost (MC).

Within the limits of his research work, the author puts forward the principles that are necessary for the development of the theory of profit maximization: focus on achieving the strategic goal of the firm; limitation; rationality; rarity; preferences; equilibrium; limiting analysis.

The principle of focusing on achieving the strategic goal of the company implies the development and application of any methods, methods and practices that, in a successful combination, would most likely bring entrepreneurs closer to achieving a strategic goal - maximizing profits in the long term.

The principle of limitation is appropriate, due to the fact that maximization as the goal of a firm's activities (from the point of view of supporters of the neoclassical school) is always associated with a number of limitations, i.e. you always have to take into account the many assumptions that have to be put forward when making maximization as a strategic goal.

The principle of rationality is relevant, since it implies the variability of possible events and the choice of the most optimal of them: individuals most often assess the "utility" and costs of all alternatives in the decision-making process.

The principle of scarcity is relevant due to the fact that in a real situation situations always prevail in which the needs and desires of individuals always exceed their capabilities.

Individuals are characterized by given and stable preferences, on the basis of which they form the utility of all choices and choose the alternative that maximizes the net utility.

The study will focus primarily on situations in which none of the participants economic activity will have no incentive to change their behavior.

Limit Analysis - effective approach to the solution of problems posed in the framework of neoclassical theory. Decision analysis is most convenient in terms of marginal benefits and costs.

All of the above principles form the basis for the introduction of the economic principle and the principle of opportunity costs.

The economic principle follows from the principle of rationality: minimize costs relative to the level of profit, or maximize profit for a given level of costs. Thus, the economic principle leads us to the solution of the problem of maximization or minimization. The application of the economic principle corresponds to the careful use of resources and the determination of the optimal level of output.

Opportunity costs follow from the principle of scarcity. Any choice leads to alternative costs, since a decision in favor of one alternative leads to damage in the other. There are two sides to opportunity costs: either maximizing profits corresponds to minimizing costs, or alternative costs increase, and then the choice must be revised in favor of another alternative.

The principle of profit maximization is that firms plan their activities for the coming period, trying to maximize the size of profits in this period, or at least minimize losses. Determination of the optimal, from the point of view of the greatest profit, production volume is carried out using two methods - the gross comparison method and the limit comparison method... The application of these methods presupposes the assumption that only the sales price of products and the volume of production are optimized (all other parameters remain unchanged) in the period under consideration is equal to the volume of sales.

The gross comparison method assumes calculation of profit for different values of the volume of production and sales of products by deducting the sum of the total (gross) costs of the vehicle from the total income (gross revenue) TR . Total income calculated by multiplying the quantity of products sold Q by its market price R:

The optimal volume of production and sales is defined as the maximum amount of profit.

TR - TS= Profit max.

Limit comparison method... Marginal cost optimization uses marginal cost MC and marginal income Mr. The marginal revenue is understood as the change in the revenue of the enterprise TR as a result of the change in the value of sales Q:

As long as the amount of marginal income (additional income per unit of output) exceeds the value of marginal costs (additional costs for the same unit of output), an increase in production and sales increases profits. The optimal value of the volume of production and sales is achieved when marginal costs become equal to marginal income. With a further increase in the volume of production, the amount of additional costs will exceed the amount of additional income per unit of output, the profit will decrease.

6.2 Classification of market structures: perfect competition, monopolistic competition, oligopoly, monopoly.

Based on the presented characteristics, it is possible to define different types of market structures:

perfect competition- market model, which is characterized by price competition between producers of standardized products unable to influence the market equilibrium and the market price. Market structure for which at least one of the conditions is not met perfect competition, is a market of imperfect competition. Markets of imperfect competition, in turn, are represented by markets pure monopoly, monopolistic competition, oligopolistic markets;

monopoly- the type of market structure characterized by the absence of competition, which presupposes dominance in the market closed by entry barriers by one firm that produces a unique product and controls the price;

monopolistic competition- the type of market structure, within which sellers of differentiated products compete with each other for sales volumes, and non-price competition acts as the main reserve for achieving a competitive advantage in the market;

oligopoly- the type of market structure in which several interdependent and often interacting firms compete for market share (sales).
6.1 The concept of market structure and its key features.

Under the market structure it is customary to understand the totality of many specific signs and features that reflect the peculiarities of the organization and functioning of a particular industry market. The concept of market structure reflects all aspects of the market environment within which a firm operates - the number of firms in the industry, the number of buyers in the market, the characteristics of the industry product, the ratio of price and non-price competition, the bargaining power of an individual buyer or seller, etc.

1. Number of firms in the industry... The number of sellers operating in a given sectoral market will determine whether or not an individual firm has the ability to influence market equilibrium. All other things being equal, with a large number of firms on this market any attempts by an individual firm to influence market offer by reducing or increasing individual supply will not lead to any significant changes in the market equilibrium. In this case, the market share of each particular firm is negligible. A different situation will arise when the market share of a firm is large, that is, one or more large firms operate in a given market. Such a firm has the opportunity to influence the market supply, and hence the market equilibrium and market price.

2. Market price control... The degree of control of an individual firm over the price is the most striking indicator of the level of development of competition relations in the industry market. The more control an individual manufacturer has over price, the less competitive the market is.

3. The nature of the products sold on the market- a standardized or differentiated product is produced by the industry. Product differentiability means that in a given market, different firms offer products designed to meet the same need, but differing in different parameters. Here there is such a relationship: the higher the degree of differentiation (heterogeneity) of industry products, the more the firm has the opportunity to influence the price of the goods it produces and the lower the degree of competition in the industry. The more standardized (homogeneous) industry products are, the more competitive the market is.

4. Conditions for joining the industry, which is associated with the presence or absence of barriers to entry into the industry. The presence of such barriers will hinder the entry of new firms into this industry market and, consequently, the development of industry competition.

5. The presence of non-price competition... Non-price competition takes place if the industry product is differentiable. Non-price competition - competition for the Quality of products, services, location and availability, and advertising.

Revenue and profit

Revenue- gross or total income equal to the value of goods and services sold by the firm for a certain period, for example, a year. In a modern market, revenue is the amount Money received by the firm from the sale of goods and services for a certain period.

Economic profit represents the firm's income received in excess of economic costs equal to the sum of explicit and alternative (imputed costs). The value of economic profit is defined as the difference between production costs, including alternative (imputed) costs.

Accounting profit. Accountants calculate profits differently. Accounting profit is the gross income of the firm minus its explicit costs, which are fixed when introducing accounting... Accounting profit exceeds economic profit by the amount of opportunity cost, which is any lost revenue from use own resource, equity capital.

Losses rearrange the losses of the firm that arise if costs exceed revenues.

Profit is the property, the reward of the entrepreneurs who own the firms, and is the main motive entrepreneurial activity... This encourages entrepreneurs to look for ways to maximize their profits.

Profit maximization. The principle of profit maximization is that firms plan their activities for the coming period, trying to maximize the size of profits in this period, or at least minimize losses. The determination of the optimal, from the point of view of the greatest profit, the volume of production is carried out using two methods - the method of comparing gross indicators and the method of comparing the limit indicators. The application of these methods presupposes the assumption that only the sales price of products and the volume of production are optimized (all other parameters remain unchanged) in the period under consideration is equal to the volume of sales.

The gross comparison method assumes calculation of profit for different values of the volume of production and sales of products by deducting the sum of the total (gross) costs of the vehicle from the total income (gross revenue) TR (eng. total revenue). Total income is calculated by multiplying the quantity of products sold Q by its market price R:

The optimal volume of production and sales is defined as the maximum amount of profit.

TR - TS= Profit ® max.

Limit comparison method... Marginal cost optimization uses marginal cost MC and marginal income Mr(eng. marginal revenue). The marginal revenue is understood as the change in the revenue of the enterprise TR as a result of the change in the value of sales Q:

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