Assignment 1: Maximizing Profits and Minimizing Losses

Assignment 1: Maximizing Profits and Minimizing Losses

Consider a supplier of agricultural equipment who is deciding how much of two products should be produced by his firm. You determine what the two products are.
Now create a report that includes a discussion and analysis regarding how such a supplier makes such a determination in order to maximize the firm’s profits. Include in your response:
A discussion of exactly what costs are associated with profit maximization.
A discussion of the concept of “opportunity cost.”
A discussion of the alternative production opportunities.
A discussion of the various constraints which firms face in maximizing their economic profit.
In responding to this assignment, quotations, paraphrases, and ideas you get from books or other sources of information should be cited using APA style. Help with citing sources can be found through the Academic Resources page under the Help menu .

By the due date assigned, post your initial response in the Discussion Area below. Through the end of the module, read all of the other students’ submissions, and post substantive comments to at least two classmates.
Grading Criteria
Maximum Points
Quality of initial posting, including fulfillment of assignment instructions
16
Quality of responses to classmates
12
Frequency of responses to classmates
4
Reference to supporting readings and other materials
4
Language and grammar
4
Total:
40

Maximizing Profits and Minimizing Losses

The two products to be considered for the supplier of agricultural equipment are Cultivator and Trowel. Assuming that the current season is for cultivations, there are various decisions this supplier will make in order to maximize the profit. Therefore, the supplier will strive to operate where marginal revenue (MR) equals marginal cost (MC). Profit-maximizing level of output should be produced because the cultivators will be in high demand and the Trowels will be in lower demand. Costs associated with profit maximization include the cost of storage, production cost, direct labor, direct materials, distribution costs, and factory overhead costs (Gao, & Chen, 2015). The supplier will also incur opportunity cost for opting to produce more Cultivators over Trowels. Additional costs will relate to the cost of increasing production of the cultivators to meet the high demand.

Opportunity cost is the cost incurred on a foregone alternative (Cowen & Tabarrok, 2015). Simply put, if the supplier chooses to produce Cultivator over Trowel, then the cost foregone in producing Trowel is an opportunity cost. Trowels which are used for planting will soon be in high demand because their demand will increase after cultivation. However, the supplier has to forego that opportunity to focus and invest in the current opportunity of meeting the high demand for cultivators. The su……….