A PREMISE MISTAKEN FOR AN OBJECTIVE by

The conventional wisdom in microeconomics is that firms maximize profits. The analytics have been developed to establish certainty as to the specific output level that accomplishes this objective and the unique market price that assures that the profit-maximizing output is sold. The analytics are reinforced by diagrams that are simple, straightforward, and convincing, and are found in virtually every principles textbook. Those unfamiliar with the diagrammatics regarding the typical profit-maximizing firm operating in a perfectly competitive market environment, where the price is determined by supply and demand conditions in the market and the firm achieves profit maximization at the output level uniquely identified with this condition: marginal cost = marginal revenue, are referred to Appendix A. In the short run, such a firm may earn profits but in the long run competition forces the firm to operate at maximum efficiency by cutting its price and reducing its profits to what is barely required to assure that it will continue to operate. Others more familiar with the micro-economics involved need not bother with Appendix A. The Profit Maximization Principle The mainstream demonstration of the profit maximization principle is essentiall