chapter  6
16 Pages

Optimal output selection

This chapter covers the intuition of profi t maximization, and how this intuition can be used to improve both personal and professional decision making. Emphasis is on economic decision making, or comparing costs against benefi ts in all choices. The concepts discussed here include how an agribusiness fi rm selects outputs under continuously changing prices. The production possibilities frontier is defi ned and explained, as is the marginal rate of product substitution, and the isorevenue lines used to fi nd the optimal output combination. The chapter concludes with a brief review of profi t-maximization rules for input use, outputs, and input combination.