The microeconomic maximisation of a ratio of profit: a restatement

Abstract: On the traditional microeconomic theory, firms are supposed to maximise theaggregate pure profit. We study other objective functions which are ratios profit over capital. We explore various combinations, proposing a typology of the ratios o f profit, particularly the rate of profit (accounting profit over capital), the rate o f gross profit (gross profit over capital), the rate of accounting profit (accounting profit over capital). The cases of monopoly with variable coefficient of capital, monopoly with fix coefficient of capital, competition with fix coefficient of capital, are studied. The solutions given by the maximisation of the aggregate pure profit and the maximisation of the rate o f profit are compared. We conclude to a usually lower volume of production with the maximisation of the rate o f profit. Thus, as firms are smaller, competitionmay be greater; however the clearing of the market must be studied; in competition at the very long term, with the rate o f profit maximisation, the pure profit remain positive.

Keywords: Maximisation; Microeconomics; Profit; Rate of profit (search for similar items in EconPapers)
Date: 1993
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Published in [Research Report] Laboratoire d'analyse et de techniques économiques(LATEC). 1993, 26 p., figures, graphiques

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Working Paper: The Microeconomic Maximisation of a Ratio of Profit: a Restatement (1993)
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