A Theory of Return-Seeking Firms

We introduce a theory of return-seeking firms to study the differences between this and profit-maximising models. A return-seeking objective takes into account the opportunity cost of each additional resource input to a firm's production as being a potential capital input choice in an alternative project. We find that firm supply curves cease to exist in perfectly competitive markets, supply curves in general may slope up as well as down, that economies of scale are necessary for production, and that firms always produce on a decreasing portion of their cost curve