At first glance it appears reasonable to assume that firms seek maximum profit. In this
section we identify how a firm might achieve this ambition. In Chapter 6, the validity of
the assumption will be discussed, and alternative goals of the firm put forward.
In Chapter 3 we analysed consumer demand. The demand curve showed that to sell
more output, other things being equal (i.e. ceteris paribus), price must fall. Total revenue
then rises or falls relative to the value of price elasticity. The demand curve therefore
specifies the price, total revenue and marginal revenue associated with each level of
output. In this chapter we have seen how those same levels of output are associated with
values of cost.