The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Zero-Profit Condition

  • John Eatwell
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1302

Abstract

The profit-function for a competitive firm may be defined as
$$ \pi \left(p,w\right)=\max\;p\cdot f(x)-w\cdot x $$
where p, w are the prices of the output, y = f(x), and inputs, respectively. If f displays increasing returns to scale π will not be defined. If f displays constant returns to scale π may not be defined.
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Bibliography

  1. Marshall, A. 1890. Principles of economics, 9th (Variorum) ed. London: Macmillan, 1961.Google Scholar
  2. Walras, L. 1874–7. Elements of pure economics. Trans. ed. W. Jaffe. Homewood: Irwin, 1954.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • John Eatwell
    • 1
  1. 1.