清华大学中级微观经济学讲义.ppt

Profit-Maximization What Do We Do in this Chapter? After working our “producer’s budget sets” (production sets), We are working on “producer’s choices” Please pay attention to the similarity and differences between “producer’s choices” and “consumer’s choices” Economic Profit The economic profit generated by (x1,…,xm,y1,…,yn) is Notes: For the time being, we restrict to the case of a competitive firm, which is a tiny relative to the market size and takes prices p1,…,pn w1,…,wm as given constants; Short-run Economic Profit Suppose the firm is in a short-run circumstance in which Its short-run production function is The firm’s fixed cost isand its profit function is Short-Run Iso-Profit Lines An iso-profit line contains all the production plans that yield the same profit level. The equation of an iso-profit line is I.e. Short-Run Iso-Profit Lines Short-Run Profit-Maximization Short-Run Profit-Maximization Short-Run Profit-Maximization A Mathematical Approach to Short-Run Profit-Maximization Mathematically, the firm’s short run problem is: Maximize Subject to: This gives us: pMP1=w1 Important: We have assumed that MP1 is decreasing in x1 Comparative Statics of Short-Run Profit-Maximization What happens to the short-run profit-maximizing production plan as the output price p changes? Comparative Statics of Short-Run Profit-Maximization Comparative Statics of Short-Run Profit-Maximization Comparative Statics of Short-Run Profit-Maximization A Useful Math: The Envelope Theorem Suppose x* maximizes g (x; t), where t is a parameter; Then x* varies with t, i.e, x*=x*(t); We have gx [x*(t), t]=0; Let g*(t) = Max g(x,t) = g[x*(t), t] Then, the dg*(t)/dt=gx [x*(t), t]x*’(t) + gt [x*(t), t] = gt [x*(t), t] This is called the Envelope Theorem. Applying the Envelope Theorem Where, we plug in Let ?* be the optimal profit level; We get d?*/dp=y0; d?*/dw1=-x10. Comparative Statics of Short-Run Profit-Maximization What happens to the short-run profit-maximizing p