lecture 16 - LECTURE 16 FIRM DECISION-MAKING AND SOCIETAL...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
LECTURE 16 FIRM DECISION-MAKING AND SOCIETAL GAINS Until now: how households decide how much to buy how much well-being households get from goods bought.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2010: LECTURE 16 2 Now: how firms decide how much to make how much (operating) profit firms make from goods made. how much well-being households get from (operating) profits made by firms. Mankiw, Chapter 7
Background image of page 2
2010: LECTURE 16 3 FIRM DECISION-MAKING DIFFERENCE BETWEEN MANKIW AND ME Mankiw - each firms makes only 1 unit Me - firms makes more than 1 unit Mankiw Me Seller Cost Grandma 500 Georgia 600 Frida 800 Mary 900 Units Marginal Cost 1st 500 2nd 600 3rd 800 4th 900
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2010: LECTURE 16 4 HOW DO FIRMS CHOOSE HOW MUCH TO MAKE? What are firms trying to do? To make as big profit as possible: (Operating) profit = revenue - (variable) cost = producer surplus How does it decide its ouput? Point #3: Most decisions can be broken down into marginal decisions. Margin divides goods made from goods not made
Background image of page 4
2010: LECTURE 16 5 Decision Process: If making 38 units, does profit increase if move the margin and make extra unit?
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/29/2011 for the course ECON 2010 taught by Professor Mertens,wi during the Spring '07 term at Colorado.

Page1 / 19

lecture 16 - LECTURE 16 FIRM DECISION-MAKING AND SOCIETAL...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online