Answer to Question #247015 in Economics for delilah

Question

1.    Profit Maximization for Corn-Soybean Farm 

Answer 1

When a profit-maximizing firm makes a choice of factors of production and volumes of output, it thereby reveals two points: first, the selected volumes of factors of production and outputs represent a feasible production program, and second, these selected combinations are more profitable than other feasible options. choices that the firm might choose.

In other words, the profit earned by the firm at prices of period t must be greater than if at these prices the firm used the production program of period s, and vice versa. If any of these two inequalities were violated, the firm could not maximize profits (assuming the technology remains unchanged).

Thus, if we ever encounter two time periods in our observations in which these inequalities are violated, we will know that the firm did not maximize profits in at least one of these periods. Compliance with these inequalities is literally an axiom of profit-maximizing behavior,