In
economics,
profit maximization is the
short run or
long run process by which a firm determines the
price and
output level that returns the greatest
profit. There are several approaches to this problem. The total revenue–total cost perspective relies on the fact that profit equals revenue minus cost and focuses on maximizing this difference, and the
marginal revenue–
marginal cost perspective is based on the fact that total profit reaches its maximum point where marginal revenue equals marginal cost.