ECON 101 2Midtermreview

Economies of scale occur when the cost of producing a

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Unformatted text preview: t rational decisions influences economic behavior—both the decisions that people make and the consequences of those decisions for the way markets work. There are three impediments to rational choice: • Bounded rationality • Bounded will- power • Bounded self- interest The Endowment Effect The endowment effect is the tendency for people to value something more highly simply because they own it. Chapter 10: Organizing Production What is a firm? A firm is an institution that hires factors of production and organizes them to produce and sell goods and services. The Firm’s Goal A firm’s goal is to maximize profit. If the firm fails to maximize its profit, the firm is either eliminated or bought out by other firms seeking to maximize profit. Accounting Profit Accountants measure a firm’s profit to ensure that t...
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