Chapter 20 - Profit Maximization

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5 Terms

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Profit Function

Total Revenue (TR [P*Q]) - (TC [FC + VC}) Total Costs

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Types of Firms

Proprietorship

Partnership

Corporation

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Short-Run Profit Maximization

- Fixed and Variable inputs

- pie = p * y - w1x1 - w2x2

- Uses production function as a constraint

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Isoprofit

Combinations of input levels that yield the same profit

- Slope = - w1/w2

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Long-Run Profit Maximization

- All inputs are variable

- Fixed Costs

MR = MC