This papel es a critique of the standard conception of the relation between competition and profit and takes Varian as a representative case. Varian starts defining profit as the surplus of revenues over cost: profit is made by buying cheap and selling dear. But the he stumbles on the fact that selling-price cannot be different from cost-price under competition. As Varian views it, competition annihilates the profit margin. This means that, in the general competitive equilibrium, all the goods must be bought and sold at their value, wich Varian takes it to mean that profit cannot exist in competition. This carries the implication that the notion of competitive profit is a contradiction in terms, for, to the extent that competition prevails, there can be no surplus of selling-price over cost-price and, as long as there is susch a divergence, competition does not prevail. I contrast this standard conception of Varian with Classical Economics, where competition equalizes the profit rate. In Classical Economics, profit is not originated in exchange, but in production and the contradictions that plague Varian treatment do not arise. Standard Micro Theory should have not ignored this way.
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Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number
200414.
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