The Cost of production Chapter 13
The Cost of Production Chapter 13
The Law of Supply Firms are willing to produce and sell a greater quantity of a good when the price of the good is higher This results in a supply curve that slopes upward
The Law of Supply • Firms are willing to produce and sell a greater quantity of a good when the price of the good is higher. • This results in a supply curve that slopes upward
The Firm's Objective o Economists normally assume that the economic goal of the firm is to maximize profits ofit
The Firm’s Objective • Economists normally assume that the economic goal of the firm is to maximize profits
A Firm's profit ● Total revenue The amount that the firm receives for the sale of its output Total cost The amount that the firm pays to buy inputs Profit is a firm' s total revenue minus its total cost Profit= Total revenue- Total Cost
A Firm’s Profit • Total Revenue – The amount that the firm receives for the sale of its output. • Total Cost – The amount that the firm pays to buy inputs. • Profit is a firm’s total revenue minus its total cost. Profit = Total Revenue – Total Cost
Cost as Opportunity cost o A firms cost of production includes all the opportunity costs of making its output of goods and services An important example is the opportunity cost of the financial capital that has been in vested in the business
Cost as Opportunity cost • A firm’s cost of production includes all the opportunity costs of making its output of goods and services. • An important example is the opportunity cost of the financial capital that has been invested in the business