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Initially, we have the distribution of income: Y = MPLxL + MPLxK.

But, when the economic profit = 0, we have constant returns to scale. And since, input=output, if I am not mistaken, there is just enough money to distribute to L and K.

zY = F(zK,zL)

Therefore, there isn't enough money to distribute to the economic profit.

So, why Why is it Y=F(K,L), and not Y=F(K,L, Economic profit). It would make the economic profit automatically taken into account when there are constant returns to scale.

Thank you for your help.

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    $\begingroup$ "since, input=output, if I am not mistaken" Do you mean value of input and value of output? $\endgroup$
    – Giskard
    Commented Sep 7, 2022 at 14:20
  • $\begingroup$ Hi, you have already several answers on your question, yet you did not accepted any of the answers you got. I would like to remind you that in our Stack Exchange format, you should accept answer if you believe it answered your question. You do not need to feel pressured to accept answer if you believe it did not answered your question, but in your case, lot of your questions already received highly upvoted answers (such as here) and you even thank people in comments indicating that the answer helped you. In that case you should accept it $\endgroup$
    – 1muflon1 ♦
    Commented Sep 9, 2022 at 8:32
  • $\begingroup$ hi, How do I accept it? $\endgroup$
    – student
    Commented Sep 9, 2022 at 11:32

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If you are measuring $Y$ in monetary terms, then $Y=F(K,L)$ is the value of output. $F$ is about feasibility, not sure why you would include the size of economic profit therein. You can derive the economic profit by subtracting costs of input from value of output.

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You should not confuse two kinds of relations, technological relations and relations describing the behaviour of an economic agent. The production function doesn't describe the decision of a firm to produce or not produce, and what amount of output.

The production function is a technological relation, describing the technological possibilities of producing $Y$ with certain factors of production, $K$ and $L$, in this case. It links output with production factors.

In the theory of the profit maximization, in microeconomics, the production function represents a constraint, depending on the available technology, on what a firm can produce. The firm, in the theory of profit maximization, maximize its profit, with the constraint of a given technology.

That is, profit maximization describes the behaviour of the firm, how much output the firm chooses to produce, the available technology says what is feasible, it restricts the choices of the firm.

Profit has nothing to do with technology, profit isn’t a production factor. So, it makes no sense introducing it in the production function.

To decide how much produce in order to maximize profit you have to call a manager. To change the technology, you have to call an engineer or buy new machines.

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