321_13 - ECON 321 Spring 2011: Lecture 13 Chapter 19:...

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ECON 321 Spring 2011: Lecture 13 Chapter 19: Profit Maximization
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Definitions for Chapter 19: Profit Maximization Profit = Total Revenue – Total Costs Factor Demand = firms’ demand for a particular input as a function of the input prices Set where the value of the marginal product of the input equals it’s marginal cost (price) Short Run = period of time short enough so that at least one input or factor of production is fixed ( can’t be changed) Isoprofit line = a set of input and output combinations all yielding the same profit Important! – Not every point on an Isoprofit line will be technologically feasible. Think of them as indifference curves: we might like to get to a point on the line but we may not be able to.
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Group Problems 1. Jed’s production function is: f(h,p) = min{h,p} he has a fixed amount of p = p 0 The price of output is s, and the only cost of production is w per unit of
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321_13 - ECON 321 Spring 2011: Lecture 13 Chapter 19:...

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