Chapter 3: Theory of the firm
First-year students of economics are usually impressed by the symmetry of mainstream microeconomics. Firms maximize profits, just as households are assumed to maximize utility. After having mastered the shapes of the total utility curve and that of the indifference curves in the chapters covering consumer theory, students simply have to reproduce these curves to obtain the total product curve and the isoquants of production theory. The U-shaped cost functions are then derived. It is at this stage that the instructor has to be most vigilant, for students who have had working experience will object to the implication that average total costs eventually rise with sales.
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