PRODUCTION THEORY ◆ Profit functions o Economic theory postulates that the objective of the firm is to maximize profits, which are defined as the difference between the firm's revenue and costs TI(p, w)=maxpf(x)-wx) maxipy-c(w, D)PRODUCTION THEORY uProfit Functions u Economic theory postulates that the objective of the firm is to maximize profits, which are defined as the difference between the firm’s revenue and costs. ( p,w) maxpf (x) wx maxpy c(w, y)