THE SHORT-RUN AGGREGATE PROFIT FUNCTION AND THE CAPACITY DISTRIBUTION

The mapping between the capacity distribution of production activities and the short-run aggregate profit function is analyzed, with emphasi s on the recovery of the former from the latter and the characterizati on of the profit function. For the case of two inputs, it is shown tha t the mapping is one-to-one. It is also shown that the short-run aggre gate profit, and hence the output supply and input demand, functions c an be approximated by polynomials in the reciprocals of normalized inp ut prices. Properties of these functions are also presented.