Utility Maximization, Individual Production and Market Equilibrium
This paper constructs an equilibrium model of the supply behavior of an industry comprised of utility maximizing owner-operators, and derives its implications for empirical work. Except for the case of long-run constant costs, the perverse results for the firm (a backwar d-bending labor supply curve for the entrepreneur may lead to a negatively-sloped product supply curve and positively-sloped input demand curve) carry through to the industry. New results include the finding that, under increasing costs, a rise in entry costs can lead to a fall in price, even when the entrepreneur's labor supply curve is upward sloping.
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|Date of creation:||01 Oct 1988|
|Date of revision:|
|Publication status:||Published in Southern Economic Journal, October 1988, vol. 55 no. 2, pp. 374-390|
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