chapter19_2009 - Intermediate Micro II Instructor: Prof...

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Econ 2350M Winter 2009 1 Intermediate Micro II Instructor: Prof Berta Esteve-Volart Department of Economics, York University Chapter 19 – Profit Maximization Note: Only for students of Econ 2350M
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Econ 2350M Winter 2009 2 Profits • Competitive markets here: firms and consumers price takers •F i r m produces n outputs • Sold at prices • Using m inputs • Paying factor prices • Profits=revenue-cost: ) ,..., ( 1 n y y ) ,..., ( 1 n p p ) ,..., ( 1 m x x ) ,..., ( 1 m w w = = = m i i i n i i i x w y p 1 1 π
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Econ 2350M Winter 2009 3 Organization • Nowadays manager of a firm is usually not the same person as owner • Owners then define profit maximization as objective for the manager to follow
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4 Fixed and Variable Factors • In the long run, all factors variable: not possible to make negative profits Æ it would be preferred to use zero inputs and produce zero • In the short run, some factors fixed (e.g. lease of a factory): possible to make
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chapter19_2009 - Intermediate Micro II Instructor: Prof...

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