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Profit as Cost versus Profit as Surplus over Cost: A Case Study on Varian's "Intermediate Microeconomics"

Listed author(s):
  • Ormazabal Sánchez, Kepa Mirena

On the analysis of Varian’s textbook on Microeconomics, which I take to be a representative of the standard view, I argue that Varian provides two contrary notions of profit, namely, profit as surplus over cost and profit as cost. Varian starts by defining profit as the surplus of revenues over cost and, thus, as the part of the value of commodities that is not any cost; however, he provides a second definition of profit as a cost, namely, as the opportunity cost of capital. I also argue that the definition of competitive profit as the opportunity cost of capital involves a self-contradictory notion of opportunity cost.

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File URL: https://addi.ehu.es/handle/10810/6635
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Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number 2004-14.

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Date of creation: Dec 2004
Handle: RePEc:ehu:ikerla:6635
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Order Information: Postal: Dpto. de Fundamentos del Análisis Económico I, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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