Web Notes > Microeconomics

Maximizing Output

The goal of many public sector organizations is to serve as many clients as possible without running a deficit. Rather than maximizing profits, in other words, their objective is to maximize output subject to the constraint that profits not be negative. To accomplish that, the organization should choose the level of output, Q, at which average revenue is equal to average cost (AR=AC). That will generally be larger than the Q chosen by a profit-maximizing organization.

Numerical Example
PDF file illustrating the relationship between maximizing output and maximizing profit.
Excel spreadsheet used to generate the PDF file.
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 08/18/2016