PONAŠANJE KONKURENTNOG PREDUZEĆA SA SPECIJALNOM TROŠKOVNOM FUNKCIJOM
CONDUCT OF A COMPETITIVE COMPANY WITH A SPECIAL COST FUNCTION

Summary/Abstract: In order to explain the behaviour of a company in a short period of time it is necessary to understand the character of the constraints faced by it in the process of its functioning. There are two important constraints faced by businesses, which determine its behaviour: technological and market constraints. Technological limitations are contained in its production function. The company has only a (more or less) number of combinations of inputs and resulting outputs available, and this is a reality every company has to respect. The technological limitation leads to economic restrictions contained in the cost function. Competition is another form of restriction which the company has to consider. The company can produce all that is physically possible and establish a price it pleases, but it can only sell what customers want to buy and at a price at which buyers are willing to pay. In this paper we want to analyze the problem of maximizing the profits of companies in competitive markets for factors of production and output. We will start from a very simple algebraic function of production, fixed prices of production inputs and outputs and will analyze the economic consequences of the company's management decisions on production volume to the amount of total profits and producer surplus. The aim of this paper is to point out not only the algebraic and geometric way of quantifying the critical points in the development cost (the minimum point of production, the threshold cost-effectiveness, optimum cost point, the point of maximum profit, cost limits, the point of maximum production), but also the amount of profits and economic consequences when switching from one to another volume.

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