上财中级微观经济学课件.ppt

Profit Maximization Chapter Nineteen Profit-Maximization Economic Profit A firm uses inputs j = 1…,m to make products i = 1,…n. Output levels are y1,…,yn. Input levels are x1,…,xm. Product prices are p1,…,pn. Input prices are w1,…,wm. The Competitive Firm The competitive firm takes all output prices p1,…,pn and all input prices w1,…,wm as given constants. Economic Profit The economic profit generated by the production plan (x1,…,xm,y1,…,yn) is Economic Profit Output and input levels are typically flows. E.g. x1 might be the number of labor units used per hour. And y3 might be the number of cars produced per hour. Consequently, profit is typically a flow also; e.g. the number of dollars of profit earned per hour. Economic Profit How do we value a firm? Suppose the firm’s stream of periodic economic profits is P0, P1, P2, … and r is the rate of interest. Then the present-value of the firm’s economic profit stream is Economic Profit A competitive firm seeks to maximize its present-value. How? Economic Profit Suppose the firm is in a short-run circumstance in which Its short-run production function is 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 A $P iso-profit line contains all the production plans that provide a profit level $P . A $P iso-profit line’s equation is Short-Run Iso-Profit Lines A $P iso-profit line contains all the production plans that yield a profit level of $P . The equation of a $P iso-profit line is I.e. Short-Run Iso-Profit Lines Short-Run Iso-Profit Lines Short-Run Profit-Maximization The firm’s problem is to locate the production plan that attains the highest possible iso-profit line, given the firm’s constraint on choices of production plans. Q: What is this constraint? Short-Run Profit-Maximization The firm’s problem is to locate the production plan that attains the highest possible iso-profit lin