ProfitMaximizationtheoriescanbeclassifiedonthefollowing2grounds:
1.EvolutionofEconomics
2.TypesofMarket
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1.EvolutionofEconomics:
CLASSICALECONOMISTSlikeAdamsSmithbelievedprofitmaximizationdependsonthegrowthrateofCapitalAccumulation.
RICARDIANPRINCIPLEpromoterDavidRicardobelieves,ProfitMaximizationisthemarginalproductivityofLand.
KARLMARXbelievesProfitMaximizationisafunctionofOutput.
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2.TypesofMarket:
i.MONOPOLIST(whenasinglefirmdominatesthemarket):
MR(MarginalRevenue)=MC(MarginalCost)
ProfitMaximizationofaMonopolistdependsontheintersectionofMarginalRevenueandMarginalCostCurve.Thatis,therulesaysthatthemonopolyshouldincreaseoutputuptothelevelwherethemarginalcostcurveintersectsthemarginalrevenuecurve,inordertomaximizeitsprofits.Thepricechargedisthecorrespondingpriceonthedemandcurve.
ii.OLIGOPOLIST(whenthereare2firmsinthemarket):
ThetheoryissimilartothatoftheMonopolistFirm,justthatthefirmsneedtointeractatalowerdegreeincaseofOligopoly.Intheshortrunprofitmaynotbeimpactedhoweverthedifferencewillbefeltincaseofalongrun.
iii.PERFECTCOMPETITION(whentherearennumbersoffirmsinaperfectlycompetitivemarket):
Therearenobarrierstoentryandexitandmarketinformationisdeemedtobe100%.Theprincipleisthesame.WhenMRoftherevenuetopstheMCCurve,profitmakingbegins.Thiswillcontinuetillsuchtimetheprofitreachesindustrylevel.Ifevenonemarketparticipantreducesprice,theprofitmakingdeclines.
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前两天才刚考完Microeconomics,刚好还在脑子里.Hopethishelps.