文档介绍：Chapter een
Profit-Maximization
Economic Profit
A firm uses inputs j = 1…,m to make products i = 1,…n.
Output levels are y1,…,yn.
Input levels are x1,…,xm.
Product prices are p1,…,pn.
Input prices are w1,…,wm.
petitive Firm
petitive firm takes all output prices p1,…,pn and all input prices w1,…,wm as given constants.
Economic Profit
The economic profit generated by the production plan (x1,…,xm,y1,…,yn) is
Economic Profit
Output and input levels are typically flows.
. x1 might be the number of labor units used per hour.
And y3 might be the number of cars produced per hour.
Consequently, profit is typically a flow also; . the number of dollars of profit earned per hour.
Economic Profit
How do we value a firm?
Suppose the firm’s stream of periodic economic profits is P0, P1, P2, … and r is the rate of interest.
Then the present-value of the firm’s economic profit stream is
Economic Profit
petitive firm seeks to maximize its present-value.
How?
Economic Profit
Suppose the firm is in a short-run circumstance in which
Its short-run production function is
Economic Profit
Suppose the firm is in a short-run circumstance in which
Its short-run production function is
The firm’s fixed cost is and its profit function is
Short-Run Iso-Profit Lines
A $P iso-profit line contains all the production plans that provide a profit level $P .
A $P iso-profit line’s equation is