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THE FIRM’S PROFIT MAXIMIZATION PROBLEM - SFU.ca

Simon Fraser UniversityProf. KaraivanovDepartment of EconomicsEcon 301 THE firm S PROFIT MAXIMIZATION PROBLEMT hese notes are intended to help you understand thefirm s PROBLEM of maximizing profitsgiven the available technology. Both a general algebraic derivation of the PROBLEM and theoptimality conditions and specific numerical examples are presented. This is done separatelyfor the short and long MAXIMIZATION - OverviewWe assume thatfirms are in business to make as much money as possible, they striveto maximize their profits . This assumption has its rationale in the idea of natural selection or survival of thefittest - if afirm is not maximizing profits its competitors who do wouldeventually drive it out of business by employing more efficient (and more profitable) methodsof production.

Simon Fraser University Prof. Karaivanov Department of Economics Econ 301 THE FIRM’S PROFIT MAXIMIZATION PROBLEM These notes are intended to help you understand the firm’s problem of maximizing profits

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