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¶ … Shiller text. The chapter in question covers competition. The five main learning objectives of the chapter are to identify the characteristics of perfectly competitive firms and markets, illustrate how total profits change as output expands, describe how the profit-maximizing rate of output is found, recite the determinants of competitive market supply and explain why profits get eliminated in competitive markets.
Main Points
The first main point of the chapter is market structure. Figure 6.1 shows a spectrum that includes perfect competition, monopolistic competition, oligopoly, duopoly and then monopoly. The chapter makes reference to terms like how firms wield their power in the market (market power) and what each of the above market structure types make reference to. On page 119, the condition known as perfect competition, where no firm...
Page 120 and 121 talk about price takers and price setters and then the book shifts into market demand vs. firm demand.
Page 122 speaks of the production decision that each firm must make and how the decision will affect both revenue and total profit. This segues nicely into page 123 where it is talked about how to maximize profit given the market conditions that exist. Important subtopics of profit maximization including where to set the price, marginal cost, the profit-maximizing rate of output and so forth are all discussed as the book continues on pages 124 and 125. Total profit is discussed starting on 126 and it continues into page 127.
The supply side of the revenue and profit equation is covered on page 128. The firm's supply is on 128 while market supply variables are discussed on page 129.…
References
Shiller, B. (2009). Essentials of Economics (7th Ed.). New York, NY: McGraw-Hill Irwin. ISBN: 10: 0-07-337580-2
The red line denotes marginal cost and this also increases as the production increases. The shaded region is the profits of the firm. The price line is also the marginal revenue and the average revenue for the firm. So, the company earns profit only when marginal cost is less than the marginal revenue (the area denoted by the shaded portion). When marginal cost increases more than the marginal revenue,
Profit Maximization: An Actual or Theoretical Objective? Profits are necessary to day both for the capitalist socialist and any type of economy to survive. Multinationals and giant companies have the profit motive and therefore maximizing profit as the base of their operations. This also goes under a new label namely stock holder gain. This is a form of profits that happens when the profit margins of the company go up and
Corporate Objective I do not think it is necessary to have a single-valued objective function. Maximizing firm value is not mutually exclusive to all other objectives, first. Second, that's like saying that human should only seek to maximize his or her net worth -- it's absurd. A corporation is an investment vehicle, yes, but that's not all it is. As for the idea that firm value maximization is the best objective
profit maximization of monopolistic firm and the benefits and disadvantages of a monopoly to a consumer. MONOPOLY The central theory in all of the profit-maximizing outcomes rests on the idea that marginal revenue should equal marginal cost. The same is true in the case of a firm with monopoly power. Before we discuss the profit-maximizing outcomes, it is important to understand what is meant by monopoly and how does it affect
They presented the idea that "business firms maximize profit as a means to maximize the utility of their owners. In a word: businessmen maximize profit as a means to maximizing utility, so profit maximization follows from utility maximization" (Ormazabal). One may observe that this approach is quite similar to that of the new institutionalists a few decades ago, mentioned above. This approach considers that profit maximization does not seem
He believed that people cannot be trusted to act in their own best interest, and are better governed by a state that usurps the profit motive thought process from the people. He understood the evils of the profit motivator in business, and sought to artificially remove it from the equation. However, he too understood that it is natural to seek profit as the motivation for business, as he acknowledged