Document Type
Article
Department or Administrative Unit
Economics
Publication Date
Fall 2011
Abstract
Although textbooks in intermediate microeconomics and managerial economics discuss the first-order condition for profit maximization (marginal revenue equals marginal cost) for pure competition and monopoly, they tend to ignore the second-order condition (marginal cost cuts marginal revenue from below). Mathematical economics textbooks also tend to provide only tangential treatment of the necessary and sufficient conditions for profit maximization. This paper fills the void in the textbook literature by combining mathematical and graphical analysis to more fully explain the profit maximizing hypothesis under a variety of market structures and cost conditions. It is intended to be a useful primer for all students taking intermediate level courses in microeconomics, managerial economics, and mathematical economics. It also will be helpful for students in Master’s and Ph.D. programs in economics and in MBA programs. Moreover, the paper provides instructors with an effective supplement when explaining the profit-maximization concept to students
Recommended Citation
Carbaugh, R. & Prante, T. (2011). A primer on profit maximization. Journal for Economic Educators, 11(2), 34-45.
Journal
Journal for Economic Educators
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
This article was originally published in the Journal for Economic Educators and is available from the publisher here.