# 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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### 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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### Isn't Laffer curve a special case of Profit Maximization curve if not the same?

I have discovered that Profit Maximization and Laffer curves convey similar ideas. Basically, down-side parabola. Would it be correct to say that Laffer curve is nothing but application of the profit ...
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### Is the pooling equilibrium profit maximising for the firm?

Is the pooling equilibrium profit maximising for the firm? I understand that when there are no ways for the firm to distinguish among highly productive and low productive worker the best the firm can ...
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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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### Effect of exogenous parameter on three player SPNE profits

Consider three agents $A_i$. $A_1$ moves first and selects $0\leq q_1\in \mathbb{R}$. $A_2$ moves second and selects $0\leq q_2\in \mathbb{R}$. $A_3$ moves third and selects $0\leq p_1\in \mathbb{R}$ ...
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### How to find the maximum profit in a graph?

We know the maximum profit will occur at the quantity where the gap of total revenue over total cost is largest. But how can we find such gap?
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### Interior Solution for profit maximisation problem

A function $c: \mathbb{R}^K_+ \xrightarrow{} \mathbb{R}_+$ is is said to be a cost function if The value of function $c$ at $y = \textbf{0}$ is $0$: $c(\textbf{0}) = 0$ $c$ is continuous on the ...
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### Short, Medium and Long-Run Profit Maximization

Suppose that, in a perfectly competitive industry, the firms' technology have the following cost function: $C(x) = 100 + 3x + 0.04x^2$. Assume the fixed costs are sunken. a) If the demand for the ...
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### When can one drop time subscripts? Example from Angrist and Kugler (2003)

Not the first time I am asking myself, but in this paper they actually start with a time dependent maximisation problem and then drop all time subscripts. Background: They have profit maximisation ...
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### Solving for profit function $\pi (w,p)$ given the output of production function $f(z) = \sqrt{2z_1 + 3z_2}$

Solving for profit function $\pi (w,p)$ given the output production function $f(z) = \sqrt{2z_1 + 3z_2}$. I approached this problem by trying to solve the $p\nabla f(z) = w$. This is derived from ...
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### When do the curves touch the axes and when don't they?

The Demand Curve The Supply Curve Monopoly: How to Graph It In videos (1) and (2), we see that the supply and demand curves do not touch the axes. In (3), we see that the demand curve touches the Y-...
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### How would profit from labor exploitation be possible in a relatively competitive market?

Marxists often state that capitalists exploit workers by paying them less than than their labor is worth. The extraction of this surplus value results in profit. I'm wondering why this would be ...
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### Cost-optimal p2p-trade in a community of households

I’m trying to solve the following problem and I’ve been working on it for a long time already: I want to optimize electricity-costs in a smart grid. There’s producer and consumer households in the ...
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### Solving problem for optimal price (maximize profit) *attempt inside*

Let a demandfunction be defined as $D(p)=B-bp$, where $b,B>0$. A firm has some production cost, $c$, and can set the price $p$ under the constrain given by the Demand. What is the optimal price? ...
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### Homothetic production function and Profit Function

I know that homothetic production function implies that cost function is multiplicatively separable in input prices and output, and it can be written as C(w,y)=h(y)C(w,1). Can some one help me derive ...
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### Monopolies are just a mathematical misunderstanding

A little head-scratcher (and a good example why we should be careful with notation). Consider a profit maximizing monopoly, that solves over price $$\max \pi = PQ(P) - C(Q(P)) \tag{1}$$ Following ...
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### Static Profit Maximization Short Run Shut Down Decision

In considering whether to stay open or shut down in the short run, a firm compares its revenues to its “avoidable costs”. We usually think of these avoidable costs as variable costs, but of course ...
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### Show mathematically that in a competitive market, a price-taking firm has a zero profit. Also, justify the assumption that there is only one firm

Consider a firm that has a production function given by $F(x)$, where $x \in \mathbb{R}^n_+$. Assume that the function $F$ is strictly increasing in each argument, concave, twice continuously ...
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### Revenue maximization problem

There are $N>0$ Households in an economy. The government has aim to maximize a weighted average of income by imposing tax on the rich people and redistribute the tax revenue to the labor ones. ...
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### Utility function_maximazation [closed]

A consumer is deciding about her hours ($h$) and consumption ($c$), her preference over bundles of work and consumption are as follows: $U(c,h)= c + \sqrt{24-h}$ The consumer would get an hourly wage ...
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### Why does the profit function in standard neoclassical theory have exactly one maximum?

In neoclassical theory is said that the highest profit occurs when Marginal Cost equals Marginal Revenue, but this condition wouldn't be enough to determine the maximum if there were more than one. ...
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### profit-maximization

I'm having trouble on my homework and I need some help. A company sells products in a perfectly competitive market, where the price is $p = 24.$ For each of the following cost functions, write down ...
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### Why are there not more competitive nonprofits?

For example, when I go to the grocery, and peruse the various goods for sale on the shelves, there is at least a 99.9% chance that any given product is produced for-profit. Even "Newman's Own", which ...
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### Value Function For Durable-Good Monopolist with General Distribution

It is known that with a unit mass of consumers, each of whom has a value distributed between 0 and 1, one can think of the monopolist solving $$\max_{p} \ p[1-F(p)]$$ when ...
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### Why equilibrium efficiency wage maximizes worker effort per dollar wage

In the Keynesian model, to make as much profit as possible, firms will choose the level of the real wage that gets the most effort from workers for each dollar of real wages paid Source: ...
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### Production function involving profit maximisation

​Hi, I don't get how the answer of d is deduced in this question because I don't think I made any mistakes in my calculation and have also used all the information given. After knowing L is 800, I ...
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### Stackelberg with 3 firms

I'm currently trying to solve the following problem: Stackelberg with 3 firms Imagine there are three firms on a monopolistically competitive market. The marginal cost of produc- tion in each ...
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### Derivation of demand function

Hello. I'm graduate student in Japan. This time, what I want to ask is how to solve the profit maximization problem using the image production function and derive the demand function. This ...
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### Is “$f(k,l)$ is decreasing return to scale $\Leftrightarrow f_{ll}f_{kk}-f_{kl}^2>0$” always true?

For the productions $f(k,l)$ that are continuously differentiable, is the proposition that "$f(k,l)$ is decreasing return to scale $\Leftrightarrow f_{ll}f_{kk}-f_{kl}^2>0$" always true, I have ...
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### In the real world, how does a firm know their marginal costs and revenue? How do they mathematically calculate MC=MR?

I understand the theory behind it but in practice how is this done?
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### Finding long run equilibrium price, quantity and number of firms with a linear average cost function

I've been been brushing up on my micoreocnomics lately and I came across a question in Perloff that looked really simple, but for some reason I am struggling to answer: Assume we are in the long run ...
### Question on Finding the Correct Emission Tax $t$
Let there be two companies $U_{1}$ and $U_{2}$ where, initially $U_{1}$ produces and sells $x$ units at $p=18$. Production costs are $C_{U_{1}}(x)=\frac{1}{6}x^3$ and in the process $a$ units of ...