The neoclassical firm
The neoclassical firm
This chapter assesses the neoclassical firm. In neoclassical economic theory, the firm is an entity, just like the cois maximized subject to a nsumer. The consumer has an objective function, utility, which budget constraint and any constraints on feasible consumption. The firm has an objective function, profit, which it maximizes subject to constraints imposed by its technological capabilities. Chapter 2 focused on the consumer's objective function; the budget set constraint was not discussed much. For the neoclassical firm, the reverse is typically true. There is a lot of discussion about how to represent the technological capabilities of the firm and very little about profit maximization. The chapter describes ways to model the firm's technological capabilities, before studying the firm's behavior, assuming it chooses inputs and outputs to maximize its profits.
Keywords: neoclassical firm, neoclassical economic theory, profit maximization, technological capabilities, firm behavior
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