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A Course in Microeconomic Theory$
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David M. Kreps

Print publication date: 2020

Print ISBN-13: 9780691202754

Published to Princeton Scholarship Online: May 2021

DOI: 10.23943/princeton/9780691202754.001.0001

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PRINTED FROM PRINCETON SCHOLARSHIP ONLINE (www.princeton.universitypressscholarship.com). (c) Copyright Princeton University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in PRSO for personal use.date: 19 May 2022

The neoclassical firm

The neoclassical firm

(p.232) (p.233) Chapter Seven The neoclassical firm
A Course in Microeconomic Theory

David M. Kreps


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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