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A theory of return‐seeking firms
Author(s) -
Murray Cameron K.,
MarkeyTowler Brendan
Publication year - 2019
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12152
Subject(s) - profit (economics) , microeconomics , economics , production (economics) , returns to scale , industrial organization , resource (disambiguation) , perfect competition , economies of scale , supply and demand , business , computer science , computer network
We introduce a theory of return‐seeking firms to study the differences between this and profit‐maximising models. A return‐seeking objective takes into account the opportunity cost of each additional resource input to a firm's production as being a potential capital input choice in an alternative project. We find that firm supply curves cease to exist in perfectly competitive markets, that supply curves may slope up as well as down, that economies of scale are necessary for any production to occur and that firms always produce on a decreasing portion of their cost curve.