Premium
Costs and goals of the multiproduct firm
Author(s) -
Ladd George W.
Publication year - 1988
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090090405
Subject(s) - microeconomics , profit (economics) , revenue , fixed cost , economics , industrial organization , production cost , production (economics) , business , finance , mechanical engineering , engineering
A profit‐maximizing multiproduct firm's optimum production and pricing decision rules are different if the firm's fixed resources are fully employed than if they are underutilized. If they are fully employed, the opportunity cost of using a fixed input affects the firm's pricing decisions. The way for a multiproduct firm to maximize profit is to lose money on a product if large volume and low price of that product increases sales or reduces cost for other products sufficiently. Decision rules are different for a revenue‐maximizing firm than for a profit‐maximizing one.