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The formal organizations

The paradigm of work and the formal organizations within which people work are changing. Trends in organizations include less hierarchy, integrated structures, empowered employees, teams and teamwork, labor-management partnerships, and myriad other changes. Underlying all these changes is a new emphasis on values regarding how organizations function. Among the critical organizational functions to which the values framework applies is communication. Possible disposition of key issues

This is because the producer has collected positive profit up until the intersection of MR and MC (where zero profit is collected and any further production will result in negative marginal profit, because MC will be larger than MR). If the industry is competitive (as is assumed in the diagram), the firm faces a demand curve (D) that is identical to its Marginal revenue curve (MR), and this is a horizontal line at a price determined by industry supply and demand.

Average total costs are represented by curve ATC. Total economic profits are represented by area P,A,B,C. The optimum quantity (Q) is the same as the optimum quantity (Q) in the first diagram. Alternativily, we can use calculus to find the maximum of the profit function. Profit ? , total cost TC, quantity Q, and total revenue

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TR. ? = TR ? TC when profits are at a maximum. If the firm is operating in a non-competitive market, minor changes would have to be made to the diagrams. Market failures

It is assumed that all firms are following rational decision-making, and will produce at the profit-maximizing output. Given this assumption, there are four categories in which a firm’s profit may be considered. A firm is said to be making an economic profit when its average total cost is less than the price of the product at the profit-maximizing output. The economic profit is equal to the quantity output multiplied by the difference between the average total cost and the price.

A firm is said to be making a normal profit when its economic profit equals zero. This occurs where average total cost equals price at the profit-maximizing output. A firm is said to be making a zero economic profit when its marginal revenue equals marginal cost. If the price is between average total cost and average variable cost at the profit-maximizing output, then the firm is said to be in a loss-minimizing condition. The firm should still continue to produce, however, since its loss would be larger if it was to stop producing.

By continuing production, the firm can offset its variable cost and at least part of its fixed cost, but by stopping completely it would lose equivalent of its entire fixed cost. If the price is below average variable cost at the profit-maximizing output, the firm is said to be in shutdown. Losses are minimized by not producing at all, since any production would not generate returns significant enough to offset any fixed cost and part of the variable cost. By not producing, the firm loses only its fixed cost.

Resources:

www. springerlink. com/index/T254080785722431. pdf

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