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.