Basic_Theory-4

Basic_Theory-4 - Basic Theory Theory of Firm and Costs...

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Basic Theory Theory of Firm and Costs
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Industrial Organization Models ● Structure ± Conduct ± Performance ● Price Theory ○ Transaction Cost) expenses of trading above and beyond the price² ○ Game Theory) uses formal models to analyze conflict and cooperation among firms² ○ Constestable Markets) markets in which firms can enter and exit rapidly²
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9VS]`y ]T ,W`[ ● A TW`[ is an organization that transforms input in output± ● A firm can transform two inputs² capital ³K´ and labor ³L´ into output± ● If we denote output Y so that Y " F³K²L´² for some production function F³±²±´± ● Firmµs objective is t o maximize profits ± Profit " Revenue ¶ Cost ● Efficient level of production) maximum level of output for any given level of input±
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9VS]`y ]T ,W`[ ± 4Z\S`aVW^ O\R )]\w`]z² Ownership and Control ● Forms of Ownership and Control in the US ○ Sole Proprietorship and Partnership) personally liable for the debts of their business± ○ Cooporations) companies whose capital is divided into shares withheld by individuals ²shareholders³ with limited liability±
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This note was uploaded on 10/24/2011 for the course ECON 460 taught by Professor Staff during the Spring '08 term at Maryland.

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Basic_Theory-4 - Basic Theory Theory of Firm and Costs...

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