Profit Maximization and the Threshold Price
If the output market is perfectly competitive and the firm’s production function is not concave, an increase in the output price may lead to an explosive increase in firm’s profits at some point. We explore the properties of this point, called a threshold price. We derive the formula for the threshold price under very general conditions and show how it helps to study correctness of the profit maximization problem, without explicit assumptions about returns to scale or convexity/concavity of the production function.
|Date of creation:||01 Jan 1998|
|Date of revision:||29 Jan 2010|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- First, Z. & Hackman, S. T. & Passy, U., 1993. "Efficiency estimation and duality theory for nonconvex technologies," Journal of Mathematical Economics, Elsevier, vol. 22(3), pages 295-307.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:20323. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.