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Notes
1. From the perspective of individual decision making, Parkin's figure 1 could be reinterpreted in terms of Fisher's (Citation1906) separation hypothesis. In this case, however, the owner/manager would always be operating on a budget constraint (isoprofit curve) that is tangent to the PPF. Under perfect competition, the price ratio, PX/PY, is taken as given. If the market for X is monopolistic, the owner selects the profit-maximizing price, which is greater than the price associated with perfect competition (marginal cost) and increases the production (quantity supplied) of X owing to this increase in price. Under imperfect competition, the owner sets a price that is the best reply to the prices of competitors.
2. Although one could imagine a bubble diagram in which the largest revenue bubble would occur at the (quantity, price) midpoint of a standard linear demand curve.
3. In consultant-speak, economic profit is also known as economic value added or return on investment/assets.
4. In Maital's (Citation1992) survey of graduates of MIT's management of technology program, the six economic concepts found to be most useful were (in order of importance) present value, learning curves, sunk cost, opportunity cost, economies of scale and scope, and marginal cost.
5. My familiarity with the content of these texts is initially documented in Arce (Citation2004).