• Summary
  • Contents
  • Subject index

Interest in economics is at an all-time high. Among the challenges facing the nation is an economy with rapidly rising unemployment, failures of major businesses and industries, and continued dependence on oil with its wildly fluctuating price. Economists have dealt with such questions for generations, but they have taken on new meaning and significance.Tackling these questions and encompassing analysis of traditional economic theory and topics as well as those that economists have only more recently addressed, 21st Century Economics: A Reference Handbook is a must-have reference resource.Key FeaturesProvides highly readable summaries of theory and models in key areas of micro and macroeconomics, helpful for students trying to get a "big picture" sense of the fieldIncludes introductions to relevant theory as well as empirical evidence, useful for readers interested in learning about economic analysis of an issue as well for students embarking on research projectsFeatures chapters focused on cutting-edge topics with appeal for economists seeking to learn about extensions of analysis into new areas as well as new approaches Presents models in graphical format and summarizes empirical evidence in ways that do not require much background in statistics or econometrics, so as to maximize accessibility to students.

Profit Maximization
Profit maximization

Mainstream microeconomics generally assumes that firms seek to maximize economic profit, the difference between total revenue and total economic costs. This, like many others in economics, is an unrealistically simple picture of the way that firms actually make decisions. Economists make many such unrealistic assumptions that abstract from and simplify the “real world” to explain economic phenomena and generate empirically testable predictions.

Assuming that firms act rationally to maximize profit is critical for analyzing and explaining the firm's choices of outputs of goods and factor inputs. The theory of production and cost collapses without assuming profit maximization or some other maximizing assumption. For example, a production function determines a single output from each bundle of factor inputs, but technology and resource quality define ...

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