00:01
So here we're given a graph which i've reproduced that has total cost and total revenue functions.
00:06
These curves induce a profit function, right? profits start negative because costs are greater than revenues, but at some point you can see here that costs become equal to revenues and costs become equal to revenues again.
00:23
So at these two points, profit must be zero.
00:26
It's where costs are equal to revenues.
00:29
So profit is negative while we've got costs greater than revenues.
00:34
When revenues are equal to costs, we break even.
00:38
When revenues are greater than costs, we're making a profit.
00:42
We go back to zero.
00:43
And up here, we have costs are greater than revenues again, right? and we're asked if we like this q start, right? do we want to stay at this q start or not? and the key thing is to thinking about the firm's objective.
01:05
The firm's objective is to, as always, maximize profits, right? so where we should be is instead at the peak of the profit function, right? we want to be at the peak of the profit function.
01:18
What defines, however, the peak of the profit function, right? so i would...
01:24
We want to.....