How does the profit maximizing firm arrive at it's optical combination of inputs?

Question

carefully illustrate, with maybe some diagrams(optional)?

Answer 1

The firm is profit maximizing when the last unit sold has marginal cost = price sold at (in a perfect competition market).  Eventually, as more and more firms enter the market cause they seek an economic profit, all firms in the industry will only be making normal profits.

For a monopoly, they will profit maximize when the last unit sold has mariginal cost = marginal revenue.

This makes sense because the firm will continue to make money until the last unit produced costs the price they can sell it at.  If the price they made it for is greater than the price they can sell at it, their overall profit declines, so it would make sense for them to stop producing at that point.

[Answer: see above]

Answer 2

profit maximizing principle establish which businesses can be attractive for some companies to entry; the entrance of more companies in a business means new demand of resources for it and move the productive resources from others allocations to this.

when the companies does not profit maximize profits, the rest of companies can not know properly if it is a good business to participate and it is too difficult for them to decide to entry or not.