Demand, Marginal Revenue and Profit Maximization for a Perfect Competitor 

but he went to college to learn all that right? I get it college is not for every one but it worth to have a college degree not you because that will be selfish, but for your kids that the come home from school with homework and as a dad you can help your kids not only to complete their homework but help them understand the overall concepts of what they learn at school.

oh how i don't miss economics i'm glad i got through it.

Interesting though

indeed.

You are mistaking Marginal Cost for Total Cost. MC means cost incurred on producing one more unit. Let's call profit per additional unit produced Marginal Profit (MP). MP = MR - MC. As long as our MC stays less or equal to MR, we can get some profit on producing one more unit. This profit gained on producing one more unit keeps getting less and less unit it becomes zero and at that point MC = MR. I hope that clears it out.

Yishi Liu You have to add up the profits. At Qpm the farmer will be able to capture the profit he would have gotten if he produced at 4000 and 5000. The profits are different because of the law of diminishing marginal returns, regardless he will continue to earn a profit despite being lower up until he produces at Qpm.

+Yishi Liu i also dont understand that part.

+Raumil Patel sorry, do you mean that at the quantity of 5000 he will sell 4000 of them at price 2 earning a total of 12000 and the other 1000 of them at 3 earning 2000, so 12000 + 2000 is 14000 (so he is better off than when he was producing only 4000?). that's what you mean?

srly i dont understand this part. why did he have to produce till 6000? why not earn marginal revenue $3 at 4000?

thats not how much profit they make per unit sold. Its how much profit they made for the last unit that entered. By multiplying 3 and 4000 your essentially saying you make a 3 dollar profit on every single one of your 4000 units sold. That isn't the case for a short run firm because for every new entry, marginal revenue and costs change.

+bluemoonmusic78 If you listen to it in the almost end he gives a Clear explanation why! Because its a method To Maximize the profit- the way firms do it - they make sure that their Marginal Revenue equals their Cost, if the Marginal Cost greater there is a loss of the profit, which firms try to avoid.

The demand curve is flat because the only way for a firm to work in a perfectly competitive market is to sell its produce at a price determined by the supply and demand, or at an equilibrium price. So, the price at which a firm has to sell the milk becomes fixed and constant. Elasticity means how demand of a commodity will change with a change in its price, or how responsive will be customers with the change in price of milk. So, if the firm set its selling price of milk lower than the market price, every customer will want to buy from that firm because it is cheaper. Similarly, if the firm set its selling price of milk higher than the market price, no customer will want to buy from that firm because it is expensive.

but the the 4000 and 5000 you talk about is marginal profit, not total. as long as there is marginal profit, any increase in ouput will increase total output

sorry but you have misunderstood him, we should analyse total profit and not marginal profit.. 3*3+ 1*2+ 1*0.5

Since it is a purely theoretical concept. Which, does not allow you to lower price.

well in this case we assume the farmer is rational. he wants to get the maximum revenue. when he decreases or increases the price he will earn less money. that's why he has no chose but takes the market price.