prelim profit maximization

prelim profit maximization - Profit Maximization Profit...

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rofit Maximization Profit Maximization conomic Profit Economic Profit Short-run Profit-Maximization Comparative statistics of SRPM Long-run Profit-Maximization g Returns-to-scale and Profit- aximization Maximization
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conomic Profit Economic Profit A firm uses inputs j = 1…,m to make products i = 1,…n. Output levels are y ,…,y . 1 n Input levels are x 1 ,…,x m . roduct prices are p p Product prices are p 1 ,…,p n . Input prices are w 1 ,…,w m.
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he Competitive Firm The Competitive Firm he competitive firm takes all output The competitive firm takes all output prices p 1 ,…,p n and all input prices w s given constants w 1 ,…,w m as given constants.
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conomic Profit Economic Profit he economic profit generated by the The economic profit generated by the production plan (x 1 ,…,x m ,y 1 ,…,y n ) is _____________________________
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conomic Profit Economic Profit Output and input levels are typically flows. os E.g. x 1 might be the number of labor nits used per hour units used per hour. And y 3 might be the number of cars roduced per hour produced per hour. Consequently, profit is typically a flow also; e.g. the number of dollars of profit earned per hour.
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conomic Profit Economic Profit How do we value a firm? uppose the firm’s stream of Suppose the firm’s stream of periodic economic profits is   and r is the rate of interest … and r is the rate of interest. Then the present-value of the firm’s economic profit stream is V 12 PV r r 0 2 1 1 ()
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conomic Profit Economic Profit competitive firm seeks to maximize A competitive firm seeks to maximize its present-value. How?
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conomic Profit Economic Profit Suppose the firm is in a short-run circumstance in which Its short-run production function is xx 22 . The firm’s fixed cost is yf x x (, ~ ). 12 FC w x ~ and its profit function is   py wx w x ~ . 1 1 2 2
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hort- un Iso- rofit Lines Short Run Iso Profit Lines $ o rofit line contains all the A $ iso-profit line contains all the production plans that yield a profit vel of $ level of $ . The equation of a $ iso-profit line is I.e.  py w x 11 2 2 ~ . y w p x w x p  1 1 22 .
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hort- un Iso- rofit Lines Short Run Iso Profit Lines y w x wx  1 1 22 ~ p p has a slope of _______________ and a vertical intercept of _______________ How do you graph Iso-profit lines?
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hort- un Iso- rofit Lines Short Run Iso Profit Lines y   Slopes w p   1 x 1
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hort- un Profit- aximization Short Run Profit Maximization he firm’s problem is to locate the The firm’s problem is to locate the production plan that attains the ighest possible iso rofit line given
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prelim profit maximization - Profit Maximization Profit...

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