The enterprises run by self-employed workers are still very numerous, but the majority of the national output in developed countries is produced collectively, with the firm or state enterprise as the basic unit of supply. In the theory of the firm it is profit maximisation which provides the dynamic that drives markets and results in efficient resource allocation. Private firms in competitive industries fit this model reasonably well. Empirical evidence shows that they are fundamentally profit maximisers, within whatever framework of institutional constraints they operate.
The economics of supply, Page 1 of 2
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