Abstract
This paper analyzes several fundamental issues that arise in verifying a global maximum for a seemingly simple economic problem, profit maximization for a two-product firm. A new gradient path geometrical method of verifying a global maximum is presented that is analogous to the use of phase diagrams to solve for the equilibrium of a first-order differential equation system in two variables. An important advantage of the geometrical approach is that it always verifies a global profit maximum when the profit function is concave and it also verifies a global maximum in many cases where the profit function is neither concave nor quasiconcave.
Recommended Citation
(2007)
"A Geometric Analysis of Global Profit Maximization for a Two-Product Firm,"
Journal of Economics and Finance Education: Vol. 6:
Iss.
1, Article 1.
Available at:
https://scholarship.rollins.edu/jefe/vol6/iss1/1
