Short-Run iso-Profit lines A$Iiso- profit line(等利润线) contains all the production plans that yield a profit level of $Il The equation of a sii iso-profit line is I≡py-W1X1-W2X2 Le II+W2X y x1+
Short-Run Iso-Profit Lines A $ iso-profit line (等利润线) contains all the production plans that yield a profit level of $ . The equation of a $ iso-profit line is I.e. py − w1 x1 − w2 x2 ~ . y w p x w x p = + 1 + 1 2 2 ~
Short-Run iso-Profit lines y X1+ II+W2X2 has a slope of and a vertical intercept of II+W2×2
Short-Run Iso-Profit Lines y w p x w x p = + 1 + 1 2 2 ~ has a slope of + w p 1 and a vertical intercept of + w x p 2 2 ~
Short-Run iso-Profit lines y Increasing 邱 II≡ ∏≡I Slopes=+ Wi
Short-Run Iso-Profit Lines y x1 Slopes w p = + 1
Short-Run profit-maximization The firm' s problem is to locate the production plan that attains the highest possible iso-profit line, given the firm's constraint on choices of production plans. Q: What is this constraint? A: The production function
Short-Run Profit-Maximization The firm’s problem is to locate the production plan that attains the highest possible iso-profit line, given the firm’s constraint on choices of production plans. Q: What is this constraint? A: The production function
Short-Run profit-Maximization y The short-run production function and technology set for X2 y=f(x1,x2) Technically inefficient plans
Short-Run Profit-Maximization x1 Technically inefficient plans y The short-run production function and technology set for x2 x2 ~ . y = f(x ,x ~ ) 1 2