<p>The premise of the question is simply false. Companies do not maximize <span class="math-container">$Q$</span> they maximize profit.</p>
<p>For example, consider trivial case of a monopoly. The demand is given by <span class="math-container">$Q = 10-p$</span> so demand decreases with price. Now let us suppose the monopoly has constant marginal costs <span class="math-container">$c(Q)' = 2 \implies c= 2Q$</span>. Given this the profit function of monopoly will be given by:</p>
<p><span class="math-container">$$\Pi = p Q - 2Q = (10-Q)Q -2Q$$</span></p>
<p>With FOCs:</p>
<p><span class="math-container">$$ 10 -2Q -2 = 0 \implies Q^*=4 $$</span></p>
<p>So in this case the monopoly would produce exactly 4 units of products no more no less. The exact quantity of products will be different in different market structures (e.g. duopoly, oligopoly, monopolistic competition, perfect competition), and under different parameters (e.g. demand parameters costs),  but generally in all of them there will be some profit maximizing <span class="math-container">$Q$</span>. So the premise of your question is false. Of course, firms won't just produce goods to dump them into garbage and to loose profit.</p>

CC BY-SA 4.0
2021-05-09T09:59:36.180Z
2021-05-09T09:59:36.180Z
1muflon1
<p>I have a confusion.
Marginal utility is always decreasing and people will not be happy to pay 2 times of price for 2 times of a coffe but I guess the price of producing 2 times of coffe will be the same as producing one unit.</p>
<p>So in this case why this does not cause companies to have less profit from that particular product? Why companies still try to sell as much product as possible while they cannot charge you same amount. (In this case double the price vs double the coffe)</p>

<utility><nonexpert>
Marginal Utility vs Cost of production
kuti
# Marginal Utility vs Cost of production

(Asked by: username_0 on 2021-05-09)

I have a confusion.
Marginal utility is always decreasing and people will not be happy to pay 2 times of price for 2 times of a coffe but I guess the price of producing 2 times of coffe will be the same as producing one unit.

So in this case why this does not cause companies to have less profit from that particular product? Why companies still try to sell as much product as possible while they cannot charge you same amount. (In this case double the price vs double the coffe)

**Tags:** utility, nonexpert

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## 1 answers

### Answer by username_1 on 2021-05-09. Score: 2 | Accepted answer

The premise of the question is simply false. Companies do not maximize $Q$ they maximize profit.

For example, consider trivial case of a monopoly. The demand is given by $Q = 10-p$ so demand decreases with price. Now let us suppose the monopoly has constant marginal costs $c(Q)' = 2 \implies c= 2Q$. Given this the profit function of monopoly will be given by:

$$\Pi = p Q - 2Q = (10-Q)Q -2Q$$

With FOCs:

$$ 10 -2Q -2 = 0 \implies Q^\*=4 $$

So in this case the monopoly would produce exactly 4 units of products no more no less. The exact quantity of products will be different in different market structures (e.g. duopoly, oligopoly, monopolistic competition, perfect competition), and under different parameters (e.g. demand parameters costs), but generally in all of them there will be some profit maximizing $Q$. So the premise of your question is false. Of course, firms won't just produce goods to dump them into garbage and to loose profit.


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