Theory of a Firm

Chapter 7 The Theory of the Firm

Profits ,[object Object],[object Object],[object Object],[object Object],[object Object]

Types of Profit ,[object Object],[object Object],[object Object],[object Object]

Costs ,[object Object],[object Object],[object Object],[object Object],[object Object]

Profits Economic (opportunity) Costs T O T A L R E V E N U E Profits to an Economist Profits to an Accountant Economic Profit Implicit costs (including a normal profit) Explicit Costs Accounting costs (explicit costs only) Accounting Profit

Total Revenue ,[object Object],[object Object]

Total Costs ,[object Object],[object Object],[object Object],[object Object]

Fixed vs. Variable Costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Short Run vs. Long Run ,[object Object],[object Object],[object Object],[object Object]

Returns to Scale ,[object Object],[object Object],[object Object]

Returns to Scale Constant Returns To Scale Diseconomies Of Scale Economies Of Scale

Marginal Revenue and Marginal Cost ,[object Object],[object Object],[object Object],[object Object]

Try this problem… ,[object Object],[object Object],[object Object],[object Object],[object Object],1850 100 1512 90 1264 80 1064 70 870 60 725 50 580 40 450 30 315 20 175 10 0 0 VC Quantity

Making Production Choices ,[object Object],[object Object],[object Object],[object Object]

Labour vs. Capital Intensive Production ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Theory of a Firm

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Theory of a Firm