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Chapter 12 - Outline Saturday 10:54 AM I I I The Role of...

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Outline Saturday, October 02, 2010 10:54 AM I. The Role of the Firm I.1. Firm: an economic institution that transforms factors of production into good and services I.1.a. A firm organizes factors of production I.1.a. A firm produces goods I.1.a. A firms sells goods to individuals, businesses, or government. I.1. Virtual firms subcontract out all production. They sell other people's products. I.A. Firms Maximize Profit I.A.1. Profit = Total Revenue - Total Cost I.A.1. Total cost is explicit payments to the factors of production plus the opportunity cost of the factors provided by the owners of the firm I.A.1. Implicit revenues include the increase in the value of assets I.A.2. Total revenue is the amount a firm receives for selling its product or service plus any increase in the value of the assets owned by the firm. I.A.1.a. Economic profit = explicit and implicit revenue - explicit and implicit costs I. The Costs of Production I.A. Fixed Costs, Variable Costs, and Total Costs I.A.1. Fixed costs are costs that are spent and cannot be changed in the period
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Chapter 12 - Outline Saturday 10:54 AM I I I The Role of...

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