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Why does the assumption of profit maximization imply that the firm will produce each output with a basket of inputs that minimizes cost?

  1. Why does the assumption of profit maximization imply that the firm will produce each output with a basket of inputs that minimizes cost? 
  2. Explain why the perfectly competitive firm at long-run equilibrium produces an output for which long- run average cost is minimized. Is this output profit maximizing? Why or why not? 

Top Answer

a) Profit function is given by P r =P x X- (lP l  + kP k ) Therefore, for a firm taking all prices for any output... View the full answer

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1 comment
  • All the best in your studies!
    • DrKakilo
    • May 04, 2018 at 2:58pm

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