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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How do organisations diversify? Determinants of choosing new target industries

A very weird question I agree. I am interested in understanding the motives behind firm behaviours of diversification. Why would some firms choose new target sectors/activities? Is there any ...
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135 views

Appropriate economic/econometric tools to analyze segmented promotion optimization problem

I'm trying to determine which micro-economic/econometrics concepts, models, and/or tools are appropriate for an analysis of promotions. Below I Describe the problem in general terms Give ...
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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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118 views

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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2k views

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 ...
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129 views

Convexity of profit function

The profit function is convex in prices. Are there any conditions under which it is linear in prices? (The property as written in most books doesn't mention strict convexity, so it seems to suggest ...
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109 views

Optimization problem of a Cobb-Douglas function with 3 inputs

A perfectly competitive firm uses 3 inputs to manufacture a certain product according to the following Cobb-Douglas production function: $$ Q = A L_1^{\alpha_1} L_2^{\alpha_2} L_3^{\alpha_3} $$ ...
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111 views

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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42 views

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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205 views

Profit maximization problem using linear regression (pooled OLS)

I'm currently on a university assignment where I'm stuck more or less in the middle. I have to answer the following problem: Suppose you are interested in estimating the production function for ...
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233 views

Firm's profit max problem, in present value terms

So I am kinda stuck on this question. The question goes as follows: Consider a multiperiod firm, selling q1 units of a product in period t=1 at spot price P1 and q2 units in period t=2 at spot price ...
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259 views

How Would a Firm Which Produces a Giffen Good Maximize Profits?

I am curious as to how a firm which produces a giffen good would maximize profits? Having an upward sloping demand curve seems to imply that we cannot guarantee that there exists a quantity where ...
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692 views

Monotonic Transformation

How does positive monotonic transformation of production function effect the resulting profit function? For example if we had production function $f(x) $ and that gave profit function $\pi(p,w)$. Now ...
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51 views

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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53 views

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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28 views

Example on profit function that contains the maximum of a decision and a random variable

I am looking for an example of a profit function that contains the maximum of a decision and a random variable in this form: $\max(d,X)$, where $d$ is a decision variable and $X$ is a random variable. ...
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Given $f(x_1,x_2) = \min\{x_1,x_2\}^\alpha$ find the profit-maximizing factor demands, supply function and profit fuction

Given $$f(x_1,x_2) = \min\{x_1,x_2\}^\alpha$$ I have to find the profit-maximizing demand functions, supply function and profit function but I am not sure how to when the function is given as it is. ...
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Is optimizing revenue and expense objectives simultaneously better than optimizing profit as composite objective?

In the profit maximization problem, I am curious if co-optimizing revenue and expense objectives simultaneously are better than optimizing profit (revenue - expense) as a single composite objective? I ...
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312 views

Question about an economy with 3 components household, firm and government with functions given

I've spent considerable amount of time on this question, in vain. It is from one of the competitive exams for admission to a grad econ program. Help would be tremendously appreciated. Thanks. An ...
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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 ...
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How to find right MRP_L in this economic problem?

Economic problem from my textbook (here is my translation from Russian): There is a firm that is both monopoly and monopsony. It's monopoly on market of its product and it's monopsony on labor market ...
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320 views

Maximizing a Cobb-Douglas Function

Suppose that a competitive firm receives a price of $P$ for its output, and pays prices of w, r and v for its labor $(L)$, capital $(K)$ and natural resources $(R)$ inputs, respectively. The firm ...