Do firms really calculate marginal cost and marginal revenue to find the profit-maximizing output? If you examine the accounting records of most small businesses, you will be hard pressed to find explicit calculations of marginal cost and marginal revenue. So, why do economists develop rather elaborate, formal models of profit maximization when no one seems to do what we say they do?

Do firms really calculate marginal cost and marginal revenue to find the profit-maximizing output? If you examine the accounting records of most small businesses, you will be hard pressed to find explicit calculations of marginal cost and marginal revenue. So, why do economists develop rather elaborate, formal models of profit maximization when no one seems to do what we say they do?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter8: Output, Price, And Profit: The Importance Of Marginal Analysis

Section: Chapter Questions

Problem 3TY

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