Firm in the context of Profit function

In economics, output is the quantity and quality of goods or services produced in a given time period, within a given economic network, whether consumed or used for further production. The economic network may be a firm, industry, or nation. The concept of national output is essential in the field of macroeconomics. It is national output that makes a country rich, not large amounts of money.

The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction. The circular flow analysis is the basis of national accounts and hence of macroeconomics.

The idea of the circular flow was already present in the work of Richard Cantillon. François Quesnay developed and visualized this concept in the so-called Tableau économique. Important developments of Quesnay's tableau were Karl Marx's reproduction schemes in the second volume of Capital: Critique of Political Economy, and John Maynard Keynes' General Theory of Employment, Interest and Money. Richard Stone further developed the concept for the United Nations (UN) and the Organisation for Economic Co-operation and Development to the system, which is now used internationally.

In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, labour time, raw materials, or any other scarce or valuable object. Supply is often plotted graphically as a supply curve, with the price per unit on the vertical axis and quantity supplied as a function of price on the horizontal axis. This reversal of the usual position of the dependent variable and the independent variable is an unfortunate but standard convention.

The supply curve can be either for an individual seller or for the market as a whole, adding up the quantity supplied by all sellers. The quantity supplied is for a particular time period (e.g., the tons of steel a firm would supply in a year), but the units and time are often omitted in theoretical presentations.

In economics, profit maximization is the short run or long run process by which a firm may determine the price, input and output levels that will lead to the highest possible total profit (or just profit in short). In neoclassical economics, which is currently the mainstream approach to microeconomics, the firm is assumed to be a "rational agent" (whether operating in a perfectly competitive market or otherwise) which wants to maximize its total profit, which is the difference between its total revenue and its total cost.

Measuring the total cost and total revenue is often impractical, as the firms do not have the necessary reliable information to determine costs at all levels of production. Instead, they take more practical approach by examining how small changes in production influence revenues and costs. When a firm produces an extra unit of product, the additional revenue gained from selling it is called the marginal revenue (${\displaystyle {\text{MR}}}$), and the additional cost to produce that unit is called the marginal cost (${\displaystyle {\text{MC}}}$). When the level of output is such that the marginal revenue is equal to the marginal cost (${\displaystyle {\text{MR}}={\text{MC}}}$), then the firm's total profit is said to be maximized. If the marginal revenue is greater than the marginal cost (${\displaystyle {\text{MR}}>{\text{MC}}}$), then its total profit is not maximized, because the firm can produce additional units to earn additional profit. In other words, in this case, it is in the "rational" interest of the firm to increase its output level until its total profit is maximized. On the other hand, if the marginal revenue is less than the marginal cost (${\displaystyle {\text{MR}}<{\text{MC}}}$), then too its total profit is not maximized, because producing one unit less will reduce total cost more than total revenue gained, thus giving the firm more total profit. In this case, a "rational" firm has an incentive to reduce its output level until its total profit is maximized.

A case study is an in-depth, detailed examination of a particular case (or cases) within a real-world context. For example, case studies in medicine may focus on an individual patient or ailment; case studies in business might cover a particular firm's strategy or a broader market; similarly, case studies in politics can range from a narrow happening over time like the operations of a specific political campaign, to an enormous undertaking like world war, or more often the policy analysis of real-world problems affecting multiple stakeholders.

Generally, a case study can highlight nearly any individual, group, organization, event, belief system, or action. A case study does not necessarily have to be one observation (N=1), but may include many observations (one or multiple individuals and entities across multiple time periods, all within the same case study). Research projects involving numerous cases are frequently called cross-case research, whereas a study of a single case is called within-case research.

A thought leader is an individual or firm recognized as a foremost authority in a specific field. As the term implies, a thought leader leads others in the thinking around a given topic".

A rational agent or rational being is a person or entity that always aims to perform optimal actions based on given premises and information. A rational agent can be anything that makes decisions, typically a person, firm, machine, or software.

The concept of rational agents can be found in various disciplines such as artificial intelligence, cognitive science, decision theory, economics, ethics, game theory, and the study of practical reason.

Growth imperative is a term in economic theory regarding a possible necessity of economic growth. On the micro level, it describes mechanisms that force firms or consumers (households) to increase revenues or consumption to not endanger their income. On the macro level, a political growth imperative exists if economic growth is necessary to avoid economic and social instability or to retain democratic legitimacy, so that other political goals such as climate change mitigation or a reduction of inequality are subordinated to growth policies.

Current neoclassical, Keynesian and endogenous growth theories do not consider a growth imperative or explicitly deny it, such as Robert Solow. In neoclassical economics, adherence to economic growth would be a question of maximizing utility, an intertemporal decision between current and future consumption (see Keynes–Ramsey rule). Other sociological and political theories consider several possible causes for pursuing economic growth, for example maximizing profit, social comparison, culture (conformity), or political ideologies, but they do not regard them to be compulsive. Possible growth imperatives are discussed in Marxist theory, Schumpeterian theory of creative destruction and ecological economics, as well as in political debates on post-growth and degrowth. It is disputed whether growth imperative is a meaningful concept altogether, who would be affected by it, and which mechanism would be responsible.

Porter's Five Forces Framework is a method of analysing the competitive environment of a business. It is rooted in industrial organization economics and identifies five forces that determine the competitive intensity and, consequently, the attractiveness or unattractiveness of an industry with respect to its profitability. An "unattractive" industry is one in which these forces collectively limit the potential for above-normal profits. The most unattractive industry structure would approach that of pure competition, in which available profits for all firms are reduced to normal profit levels.The five-forces perspective is associated with its originator, Michael E. Porter of Harvard Business School. This framework was first published in Harvard Business Review in 1979.

Porter refers to these forces as the microenvironment, to contrast it with the more general term macroenvironment. They consist of those forces close to a company that affects its ability to serve its customers and make a profit. A change in any of the forces normally requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low because the industry's underlying structure of high fixed costs and low variable costs afford enormous latitude in the price of airline travel. Airlines tend to compete on cost, and that drives down the profitability of individual carriers as well as the industry itself because it simplifies the decision by a customer to buy or not buy a ticket. This underscores the need for businesses to continuously evaluate their competitive landscape and adapt strategies in response to changes in industry dynamics, exemplified by the airline industry's struggle with profitability despite varying approaches to differentiation. A few carriers – such as Richard Branson's Virgin Atlantic – have tried, with limited success, to use sources of differentiation in order to increase profitability.