Theory of Supply

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Theory of Supply
The theory of supply is the theory of how much output firms choose to Produce. The principal assumption of the supply theory is that the producer W l ll maintain the level of output at which he maximizes his profit. 45 Profit can be defined in terms of revenue and costs. Revenue is what the firm earns by selling goods or services in a given period such as a year. Costs are the expenses which are necessary for producing and selling goods o