Firm-Supply Cost

Firm-Supply Cost - Firms-Supply Side Costs 1 The Nature of...

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Firms-Supply Side Costs 1
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2 The Nature of the Firm What is a business firm? – An organization, owned and operated by private individuals, that specializes in production Production is the process of combining inputs to make outputs The firm must deal with a variety of individuals and organizations – Sells its output to customers – Receives revenue from them in return Where does the revenue go? – Much of it goes to input suppliers The total of all of these payments makes up the firm’s costs of production When costs are deducted from revenue, what remains is the firm’s profit » Profit = Revenue – Costs
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3 The Nature of the Firm • Every firm must deal with the government – Pays taxes to the government – Must obey government laws and regulations – Receive valuable services from the government • Public capital • Legal systems • Financial systems
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4 Fig. 1 The Firm and Its Environment The Firm (Management) Owners Input Suppliers Government Customers Initial Financing Profit After Taxes Input Costs Inputs Taxes Output Revenue Government Services Government Regulations
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5 Types of Business Firms There are about 24 million business firms in United States
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This note was uploaded on 02/17/2011 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

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Firm-Supply Cost - Firms-Supply Side Costs 1 The Nature of...

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