# Questions tagged [profit-maximization]

A modelling approach in which firms' plants are chosen via maximizing a profit function under a demand or resource limit restriction.

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### Why is a firm's profit maximized when MC=MR? Why not stop one unit before where it will still make a profit?

It seems that an equilibrium where MC<MR is preferred to one where MC=MR since in the case of the latter the firm still makes a profit. Put differently, why would a firm produce a unit at all if it ...
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### How can I choose how much to invest in each stock of my portfolio?

I'm trying to find a mathematical way to decide what percentage of my capital I should invest in each stock of my portfolio to maximize my profit. Here's my attempt to the solution: Let's say my ...
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### Competitive equilibrium for an economy with a consumer and a producer

A representative agent’s preference over consumption $(c)$ and labour supply $(l)$ is given by the utility function $$u(c_D, l_S)= c_D^a .(24-l_S)^{1-a}$$ Production of the consumption good $c$ is ...
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### Complement in production and the slope of factor demand curves

Considering a firm taking prices for granted and maximizing profits $$pf(x_1,...,x_K) - \sum_{i=1}^K q_i x_i,$$ where $f$ is strictly concave. Furthermore, let the factor demand curves be the ...
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### On the profit maximization assumption: When it fails, does it fail gracefully?

This question was inspired by a comment on another question: A basic cost-benefit analysis between two scenarios My question is: Is profit maximization generally a good assumption for analyzing the ...
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### Leisure and consumption maximization trouble

Not really sure how to to b). For a) I have (wh + Y – τwh) which I'm sure is fairly simple. I've never dealt with a utility function this complicated before and really confused by the notation in ...
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### Bid-rent function in The Microgeography of Housing Supply

I came across the paper "The Microgeography of Housing Supply" (Baum-Snow, 2020)(https://luhan2.weebly.com/uploads/9/6/0/8/96080580/housing_supply_julyb2020.pdf) and I must admit that I do ...
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### In the real world, do companies try to maximize return via maximizing profits or maximizing profits/costs (or neither)?

Suppose I buy $s$ shares of a stock at price $p_0$ and then later sell at price $p_t$. The initial and final values of my investment are then $I_0=sp_0$ and $I_t=sp_t$ respectively. The return is then ...
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### Can I get a more detailed explanation of the Weak Axiom of Profit Maximization?

In Hal Varian's Book "Microeconomic analysis" on page 35 he gives the following description of a profit maximising firm. "...If the firm is maximising profits, then the observed net output choice at ...
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### Opportunity profits vs. opportunity costs

Having learned that Opportunity costs = the costs for avoided profits are a well established and quite useful economic concept, I wonder how its counterpart is officially called and investigated: ...
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### Maximizing units under a budget constraint and increasing costs

Consider two columns. Column A has total cost per day, Column B has units bought that day. The marginal cost of each unit is increasing because of limited supply. My goal is to estimate total ...
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