How to Generate Good Profit Maximization Problems

Lewis Davis

The Journal of Economic Education, 2014, vol. 45, issue 3, 183-190

Abstract: In this article, the author considers the merits of two classes of profit maximization problems: those involving perfectly competitive firms with quadratic and cubic cost functions. While relatively easy to develop and solve, problems based on quadratic cost functions are too simple to address a number of important issues, such as the use of second-order conditions and the short-run shutdown condition. Problems based on cubic cost functions are mathematically richer but often involve messy arithmetic; furthermore, many are not plausible representations of a firm's costs. Finding cubic functions that do not suffer from these drawbacks can be a time-consuming process. The author addresses this issue by providing a procedure to generate profit maximization problems that are theoretically interesting, economically plausible, and computationally simple.

Date: 2014
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/00220485.2014.917564 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jeduce:v:45:y:2014:i:3:p:183-190

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/VECE20

DOI: 10.1080/00220485.2014.917564

Access Statistics for this article

The Journal of Economic Education is currently edited by William Walstad

More articles in The Journal of Economic Education from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().