Post-Keynesian Economics
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Post-Keynesian Economics

New Foundations

Marc Lavoie

The book is a considerably extended and fully revamped edition of the highly successful and frequently cited Foundations of Post-Keynesian Economic Analysis, published in 1992. It provides an exhaustive account of post-Keynesian economics and of the developments that have occurred in post-Keynesian theory and in the world economy over the last twenty years. Topics covered include open-economy issues, the methodological foundations of heterodox economics, consumer theory, firms and pricing, money and credit, effective demand and employment, inflation theory, and growth theories.
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Chapter 3: Theory of the firm

Marc Lavoie


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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