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E251.F11.W08.Production.Costs.Clsnts - ECON 251 Fall 2011...

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ECON 251 Fall 2011: Classnotes: Week 08: October10-13, 2011 Focusing on the operation of the firm. The Organization of the Firm (Classnotes & PowerPoints) 1. Teamwork & Specialization 2. Teamwork Shirking 3. Shirking Monitoring 4. Profits monitor the Owner Firms attempt to Maximize Profits: π = TR -TC; TR = PxQ which is a function of demand facing the firm. TC is a positive function of output. TC increases as output increases. So the question is, What rate of output maximizes profit ? NEW: First we study Production. Chapter 6 Different decisions faced by owners involve different assumptions. Before going into a business, we consider Long-Run Analysis where all the inputs are variable . Since you can vary all inputs, all costs are variable i.e. no fixed costs. Once you have started in business you are making Short-Run decisions where some inputs are fixed and some are variable therefore some costs are fixed and some are variable.
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