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Profit Maximization Strategy Evaluation
A manager of a small furniture company observes that the average profit per chair is highest when the company produces 100 chairs per week. Based on this, the manager implements a policy to always produce 100 chairs, believing this will maximize the company's total weekly profit. Critically evaluate this manager's strategy. Explain why focusing on the point of maximum average profit might not lead to maximum total profit, using the relationship between the revenue from an additional unit and the cost of an additional unit in your explanation.
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Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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