Maximizing Profit and the Shut Down Rule- Micro Topics 3.5 and 3.6

Hey econ students. If there is only ONE thing that you need to know for your microeconomics class and for running your own business it’s the profit-maximizing rule. You always produce where MR = MC. Well, not always. Sometimes you should shut down instead. In this video I show you the profit-maximizing rule and the shut down rule. Be sure to watch my other video where I explain how to maximize profit using a chart. Here is the link: • Maximizing Profit Prac...
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[@JacobAClifford]

For the answers to the practice multiple-choice questions click on "Read more". ... 1. B 2. E 3. B Need more practice? Get the Ultimate Review Packet. It's FREE to start.

[@JacobAClifford]

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[@jamescasey3575]

Please do a video on CBDC (Central Bank Digital Currency)!!!

[@shawn8847]

Please do a video on the benefits of socialist economics, hybrid economy.

[@cgarner6220]

can someone explain why 1 is B

[@dillonfernando3034]

@@cgarner6220 isnt it D?

[@pleasedontlookatme78789]

Someone give this man a Nobel peace prize

[@kaustubhk9408]

BINGO! Hahaha

[@xiex1972]

i agree

[@theboldguy.]

It's good to know that there is a difference between micro business and a small business micro is from 1 to 9 employees and small business is from 10 to 49 I say it because a lot of people consider every business as small when that's not true ...... Guy 1 : I am going to start a small business ......... You can't start a small business when you are the only one (the entrepreneur alone count as 1) and the criteria for a small business starts from 9 employees not 1 you mean that you will start a micro business not a small business ..........

[@9minutes236]

Agree

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Wow your old videos were great, but these new ones are just... legendary!

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[@Alexander_Liteplo]

I just love it when people understand teaching. Intro: show the problem that is being solved to prime the student's brain, and tell them WHY they are learning this. Explanation: Make it darn simple - teach to the least knowledgeable person in the audience, and avoid jargon. Lots of visuals. Speaking: High energy, letting your passion for the subject transfer to the students. Conclusion: remind people what they've learned and test them on it to help them remember.

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[@sublimecg8605]

In highschool my teacher used your videos and study guide to teach our course. You basically were my AP econ teacher that year and I'm now almost finished my business degree, and gotta say I still remember your effective teaching. Good for you for putting this stuff out there :)

[@vishnuvardhan_me1892]

What did you specialise in at your b-school?

[@mohammedma9299]

this guy carried me through four different Economic courses. I'm really grateful for your for what you do

[@confusedturtle5956]

can't say the same for me, bro made me fail

[@hypersonic6649]

@@confusedturtle5956 you made yourself fail lol

[@Klein-si5ig]

@@confusedturtle5956thats a you problem lmao

[@hansoyi6726]

Old vids were great, but the explanations in the new ones are clear, informative, and concise! Perfect!

[@confusedturtle5956]

I don't know about that buddy boy

[@nguyenhoangminh6208]

This gentleman is getting older perhaps but legends never die. Mr Cllifford you are the savior of millions of students. Thanks a lot!

[@coolnotcold.]

Wow you explained this so well! I was always confused with this concept but i finally understood it, thanks to you!!

[@joe-gx1yt]

I had a really bad sickness this summer and I missed a lot of my micro class as a result. Your videos are really helping me. thank you so much.

[@s.smorsecescens7433]

this is a life saver! i was particularly confused about the shutdown rule and you explained it perfectly!

[@RoyalMage69]

Jacob, that was the gift that keeps on giving the whole year. 🤟

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[@inessa9314]

Your videos are really helping me!!! This one came at the right time, I am learning this at college, but your videos make it so much clearer to understand. Thank you!!!!!!!! :D

[@victor1688]

I should have given my tuition to u 😢u r the best economic teacher ever met!!

[@erickavelez5186]

Wow! Nice! Very helpful and simplistic. I like the red, green, and yellow light concept, really helped me understand Maximizing profit and the shutdown in a whole other level.

[@giarichards1529]

I feel like I owe this guy some money or something. Thank you Mr. Clifford!

[@user-lt9gt7dk7l]

wow My man has aged.. I was watching videos 11 years ago and now I see a video from this year amazing

[@estuardoagustin4518]

Great video! It's helping me out for my microeconomics final assessment this next Sunday! :)

[@user-hi5by3tj5o]

i am really grateful for the efforts you make and your comic style

[@madhuravi6953]

You are a lifesaver Mr.Clifford. I learned more from you than my professor

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Man bro...I know I play around a lot...calling you Mark Cuban and all (still convinced you’re secretly him)...for real, for real...you are SAVING MY LIFE with these videos.

[@leoyan4847]

Yay! I'm so happy that you're making videos regularly again! I wish I was a grade younger so I would have all your newer videos for every unit! Keep it up! Great vid!

[@confusedturtle5956]

bro grow up and accept that you are old leoyan4847

[@drewrg]

You make learning economics actually interesting and easy to understand. Thank you so much!

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Your videos are amazing, thank you so much!

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Thank you so much 🥰 I love all videos!

[@shreyakommuri3929]

oh my god. thank you! thank you so much. inverted stop light, genius!

[@camerondron8246]

Clifford is quite simply just the best at this. No comparison.

[@yashb2997]

You should get the Nobel Prize for Economics.

[@itoldyounottotouchit3336]

Glad you've been active lately.

[@shrisanka]

Jacob thank you for your short economic classes, I love your energy and your approach to explaining economic concepts thank you for making all of us better economists. Hats off man

[@confusedturtle5956]

keeping my hat on bruh, he aint that good

[@sarayur8907]

Thanks a ton for this video! I've got my econ exam tomorrow and this was super helpful!

[@erenmoore9180]

Oh god, this guy is an angel. Thank you dude

[@canndenizz]

That's super informative and so effecitve that I entirely understood any point i couldn't get at a 1 hour lecture. However, I am confused at the way atc and mc lines move. Shouldn't mc line hit the negatives when atc is going down since it shows the additional amount every time you increase the quantity. If anyone can explain that would be great.

[@saha9914]

I love this !!!!!! Thank you

[@paulinemonica8917]

THANK YOU FOR SAVING ME ON MICRO

[@heavenlystorm8612]

Note to self Profit maximizing/loss minimizing is always where MC=MV Shut down point is when price falls below Average Variable Cost.

[@md06783]

MR CLIFFORD!! YOU ARE AWESOME!!

[@TheAdiva123]

you changed my life sir

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[@JohanLanting]

so helpful, tysm! the inverted stop light is a rly good visual aid

[@yungzed]

this guy is a better professor than my professor who went to wharton for undergrad and phd

[@gerrykandukeinge]

I'm a first time learner of economics, I have no problem with the subject, I understand everything I read and this videos help me a lot but when it comes to answering the questions I tend to interpret what it's really asking.

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You are literally my hero in my life, you opened the window for me, thanks.

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[@migzwrld909]

Thank you!

[@akshatbajpai8304]

Thank You🙏❤

[@user-jm6gp2qc8x]

5:28 nice summary

[@dominiccorridore259]

Is there a video covering whether firms should leave or stay in the long run?

[@kingsavage1331]

If i pass my exam i would like to thank you personally Jacob Clifford!

[@beboysub]

Thank You kind Sir

[@bintangseptianrizkyhutagal4397]

I like your explaining and some jokes haha. Thanks in advance, sir

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Thank you ❤

[@SourceCodeDeleted]

I am not an Economics student, and I am watching these. I also think I will get the course as well .

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very helpful tysm

[@sumitprabhakar7703]

Thanks You !!

[@KoloSokame]

Wow sir you look different..by the way thanks

[@davidwells8326]

if they increase prices above profit maximising equilibrium would they gain more profits?

[@fahimalam9029]

Wow! Lionel Messi is actually explaining how to maximize profit. Such a multitalented guy I must say...

[@shawn8847]

Please do a video on the benefits of socialist economics, hybrid economy.

[@user-zt9ol6jo8g]

:D;D Great Sir!!! Helping me a lot!!!!

[@danielcachafeiro2590]

Why is question 3 answer B? Why is it that firms would enter when the rest of the companies are operating at an economic loss? (Given that price is higher than average cost and not necessarily higher than total cost?

[@haknerdal]

Thanks a lot

[@shadow5625]

can anyone explain why the answer is B for question 1

[@kiaraislam7838]

answer is A. increase the production till mr=mc

[@sofiamrowca6282]

Your the reason I'm gonna pass Econ

[@economics_insight]

Increase the level of production

[@aryank2000]

do we have answers to these questions at the end?

[@ojhmble1547]

Brilliant video mate , but it made my nan float down the stairs .

[@ojhmble1547]

Good comment lad , keep up the hard work

[@Samy_-eb8gc]

i ❤ u ur thé savior

[@saxboss1]

I haven’t taught economics in 3 semesters now since I got a shitty job after grad school. I’m so jealous because this is one of my favorite units to teach:(

[@OnceAJay]

I'd like to know how to begin and don't crash 3 days later

[@kevv.1912]

1) B) But I did not quite get concept, for maximizing profit I don't need ATC, I should produce less right to reach MR = MC, why has been variable cost given? Explain someone. 2) E) I should shut down because, my production can't even cover variable costs. 3) B) Seeing me earning profits other firms are going to join if there's less barriers.

[@musawwirahmed3480]

Can someone explain to me why question 1 is B

[@theanmol1704]

Sir I have a doubt, what if we don't shut down in the red zone & keep running. All the firms would shut down, that will increase the price of the product & we will come in green zone where Marginal Revenue > Avg Total Cost & now we can make profits... Although the lecture was fantastic !!

[@nandanramesh3939]

The firms are shutting down only in the short-run, in order to bear only the fixed costs as losses. In the long-run, the market will recover (The MC will cross AVC again) and the firms will open up again in order to make profit. However, this is very subjective and totally depends on the volatility and scope of the market/sector that the firm is operating in. At the end of the day, nobody wants to be losing their money, and the ultimate goal is to make profit; PROFIT MAXIMIZATION 🎉

[@Lin-ug9lh]

I should pay my tuition fees to this sir instead of the lecturer that complicated it into a 3 hour class...

[@frog5369]

Yes I’m cooked, very cooked for my exams tomorrow 💀

[@santoshisharma4930]

(B) decrease the level of production

[@seratbhuiyan5368]

why does he have milk in the background? lmaooo

[@lovishbansal1003]

B

[@natethompson5263]

My class votes no beard.

[@ojhmble1547]

I’ve learned so much from this time to sell my child , and my left kidney and half my liver

[@ojhmble1547]

Yeah learned so much but it also effected my nan as in she downed in cabbage

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make it interest with meme, Sir

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1st comment lets gooo

[@rigira]

bro you're like the jesus for micro economics

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Keep the beard Mr Clifford

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bro got the milk

[@krishwadhwa5470]

why I am forced to study a subject I don't like 😭😭

[@hectordelama94]

Your premises are wrong. You are ignoring the effect of the Demand Curve on Revenue. Given a Demand Curve, a Fixed Cost Curve and a Variable Costs Curve (these last two then result in Marginal Cost Curve aka Supply Curve), you can then draw 2 new curves: a Total Revenue Curve and a Total Cost Curve. These new curves show the total revenue and the total cost of a certain quantity of goods/servives sold. It is important to note that this Total Revenue Curve is dependant on the prices and quantities people are willing and able to buy. This comes from the demand curve. This is what you are ignoring in your video. The Total Revenue Curve is a function of the Demand Curve: Revenue = Price*Quantity. So your revenue depends on how much you produce and at what price you sell (but quantity and production al already linked through the demand curve). Because of this, the Total Profit Curve (Total Profit Curve = Total Revenue Curve - Total Cost Curve) has its maximum point at a quantity below equilibirum. What you are saying is, in practice not true. You don't maximise your production when your MR = MC. This would be a very dumb bussiness strategy. You would never build and then sell 15 houses for 50K (Total Revenue =750K) if you can build and then sell 10 houses for 100K (Total Revenue =1M). Scarcity allows you to charge more. Even without tacking into account the increase in marginal costs (the last of those 15 houses is more expensive than the 10th) you can see that the profit for selling less units to richer people is far higher. My main point is: the more you sell the cheaper you'll have to sell it and the fall in price does not account for the increase in quantity sold. Especially in a very unequal sociey. In practice you don't sell the first apple to the richest person for a high price, and then the next apple to the second richest person for a bit less and so on, you sell all apples at certain price and that price is inversly proportional to the quantity of apples you sell. Spotify or Netflix could reduce their monthly cost and get more customers but thay would not increase their revenue. Creating fake scarcity maximises profits. PS: Barriers of entry and economies of scale tend to prevent competition from arising in many sectors

[@manassinghbhati6]

Yup, that's what the diamond industry has been doing for a long time if I'm not wrong. However, syllabus is syllabus, so he has to stick to it in his videos.

[@econdoctor]

The content of the video is correct. Your point does not make much sense.

[@hectordelama94]

@@econdoctor What part of what I say makes no sense? Do you think revenue is not a function of the demand curve? Are you saying 'exclusive' (scarce) goods are not sold for a higher price? I'm curious There: www.core-econ.org/the-economy/book/text/07.html#75-setting-price-and-quantity-to-maximize-profit Learn economics

[@econdoctor]

@@hectordelama94 MR is directly derived from the demand curve so the statement "You are ignoring the effect of the Demand Curve on Revenue" seems irrelevant.

[@je.1873]

The study of economics mainly deals with assumptions and theories. You are arguing about situations that occur "in practice," however economics is not about what happens in practice... it's a social science. Your argument is better directed for the study of finance or accounting.

[@kimkimdinar9113]

I speed up x1,25 and it feels like a song , an economic song 🥹 by the way I really appreciate your videos, you’ve saved our lives

[@ion1c_t3rr0r3]

Where are the answers to the pop quiz 🥲

[@dreamtv2710]

In the pinned comment

[@ArunKumar-eo1ui]

B