Lecture 4: Production and Profit Maximization

MIT 14.04 Intermediate Microeconomic Theory, Fall 2020
Instructor: Prof. Robert Townsend
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How do profit maximizing firms decide on the level of employment, and on their input/output mix more generally? The problem is broken down into its component parts: feasible production technology, and the prices of inputs and outputs. Predictions are made for individual firms’ responses to domestic price changes with implications for profits. Surprisingly, the same constructs can be used for economy-wide responses to international tariffs, with implications for household welfare.
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[@LinhVu-hn7ye]

Does anyone know why the cost function is c(w, y) but not c(w, x)?

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