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ACCOUNTING PROCEDUREAs in references [4 and 5], we suppose that the firm has no control over prices, but can decide what quantity of goods to produce in a given business period. It tries to choose this quantity so as to maximize its profits.At the end of each business period, at time t, the firm tries to estimate how its profit per good, mr (cIt), varies with the quantity o-of goods it produces. We call this the estimated average profit function (EAPF), and suppose, for convenience, that t takes integer values. The firm constructs this function by fitting a straight line to the data from its previous business periods, viz. its outputs v-(1),