The Odyssey of the Neoclassical Cost Theory: Marginal Cost is not Supply

Abstract

This paper proves that the neoclassical cost theory is a time-wasting odyssey. Instead, an alternative serious production theory is derived. Although the average cost is always increasing, its difference from the marginal cost, which is indeed the supply price, delivers the maximum profit. Any deviation from the indicated quantity, as tried by the neoclassical people, must result in lower profit. Although marginal cost coincides with the supply curve, treating it as supply is a cargo cult science.