Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Maximum Profit and Maximum Revenue

- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

- AuthorPosts
- October 14, 2021 at 11:05 am #637662
Can you please help with these two questions about where do we have Maximum Profit and Maximum Revenue in the Pricing decision?

(1) Max Profit occur at a point where we have (MR = MC); We have optimum selling price when MR = MC;

[optimum selling price is where we have maximum profit but demand is lowest]

(2) Max Revenue occur at a point where we have our (MR = 0); We have optimum demand when MR = 0;

[optimum demand is where we have maximum demand but selling price is 0]

Is it correct?

I watched your lecture sir but you didn’t say anything about max revenue. Can we be asked about it in the exam?October 14, 2021 at 4:53 pm #637681(1) is correct.

(2) is not correct. We have maximum revenue when MR = 0.

(Maximum demand is indeed when the selling price is 0, but if the selling price is 0 then the revenue will be 0.).

This can be asked in the exam and if you look at the graph of revenue where is talk about the marginal revenue, you will see that the marginal revenue is 0 at the maximum point on the graph.October 18, 2021 at 6:39 pm #638345(2) So Maximum revenue is where MR = 0 and it is where we have MR = MC (That is actually very theoretical)

Please elaborate on the steps involved to calculate max revenue?

October 19, 2021 at 7:19 am #638413The maximum revenue is where MR = 0, which is not where MR = MC.

The formula for MR is given on the formula sheet and you use it just as I do in the lectures, make it equal to zero and then use a bit of basic algebra to solve the equation.

- AuthorPosts

- You must be logged in to reply to this topic.