What are ways in which revenues and profits can be maximized?

1-Product Differentiation

2-Low-Price Strategy

3-Borrow Best Practices From Others

4-Control Cost

5-Maintain Market Share

6-Educate Potential Customers

by less cost with more quality 

 

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A good way to maximize profits is the emphasis on the development of digital marketing.

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The existence of action plans and strategic plans - a realistic and flexible and workable plans in addition to the contingency planThe optimum use of human and material resourcesMonitoring and EvaluationFeedback

In order to maximize profit, the firm should set marginal revenue (MR) equal to the marginal cost (MC).

Learning Objective[ edit ]

• Calculate marginal costs and marginal revenues

Key Points[ edit ]

• • Marginalcost is the increase in total cost from producing one additional unit.
  • The marginal revenue is the increase in revenue from the sale of one additional unit.
  • One way to determine how to generate the largest profit is to use the marginal revenue-marginal cost perspective. This strategy is based on the fact that the total profit reaches its maximum point where marginal revenue equals marginal profit.

Terms[ edit ]

• marginal cost

  The increase in cost that accompanies a unit increase in output; the partial derivative of the cost function with respect to output. Additional cost associated with producing one more unit of output.

• marginal revenue

  The additional profit that will be generated by increasing product sales by one unit.

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Full Text[ edit ]

Marginal Cost

Marginal cost is the change in the total cost that occurs when the quantity produced is increased by one unit . It is the cost of producing one more unit of a good. When more goods are produced, the marginal cost includes all additional costs required to produce the next unit. For example, if producing one more car requires the building of an additional factory, the marginal cost of producing the additional car includes all of the costs associated with building the new factory.

Marginal cost curve

This graph shows a typical marginal cost (MC) curve with marginal revenue (MR) overlaid.

Marginal cost is the change in total cost divided by the change in output.

An example of marginal cost is evident when the cost of making one pair of shoes is $30. The cost of making two pairs of shoes is $40. Therefore the marginal cost of the second shoe is $40 -$30=$10.

Marginal Revenue

Marginal revenue is the additional revenue that will be generated by increasing product sales by one unit. In a perfectly competitive market, the price of the product stays the same when another unit is produced. Marginal revenue is calculated by dividing the change in total revenue by the change in output quantity.

For example, if the price of a good in a perfectly competitive market is $20, the marginal revenue of selling one additional unit is $20.

Marginal Cost-Marginal Revenue Perspective

Profit maximization is the short run or long run process by which a firm determines the price and output level that will result in the largest profit. Firms will produce up until the point that marginal cost equals marginal revenue. This strategy is based on the fact that the total profit reaches its maximum point where marginal revenue equals marginal profit . This is the case because the firm will continue to produce until marginal profit is equal to zero, and marginal profit equals the marginal revenue (MR) minus the marginal cost (MC).

Marginal profit maximization

This graph shows profit maximization using the marginal cost perspective.

Another way of thinking about the logic is of producing up until the point of MR=MC is that if MR>MC, the firm should make more units: it is earning a profit on each. If MR<MC, then the firm should produce less: it is making a loss on each additional product it sells

Source: Boundless. “Marginal Cost Profit Maximization Strategy.” Boundless Economics. Boundless, 21 Jul. 2015. Retrieved 30 Apr. 2016 from https://www.boundless.com/economics/textbooks/boundless-economics-textbook/competitive-markets-10/production-decisions-in-perfect-competition-67/marginal-cost-profit-maximization-strategy-251-12348/

There are variety of ways or strategies wherein business can maximize revenue and profit:

1-Sales vs. Revenues.

2-Increase  Marketing activities.

3-Review the Pricing Strategies.

4-Expand the Distribution Channels.

5-Diversify product/service Offerings.

6-Develop Relationships

 

I agree with Mr. Mohammed Helal's answer. Thanks. 

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