chapter  4
32 Pages

Profi t maximization

This chapter explores the profi t-maximizing level of inputs and outputs for a fi rm in a competitive industry. It defi nes and explains perfect competition and clarifi es the economic approach of comparing benefi ts and costs in decision making. Graphs are used to explain the optimal levels of input use and output. This chapter emphasizes the intuitive appeal of profi t maximization and the rationale for using profi ts and losses to help determine a fi rm’s breakeven and shutdown points. It is a comprehensive treatment of the heart of microeconomics.