The Modern Firm: Costs of Production
Make choices to maximize profits
given scarcity of resources.
Time period of objective important to
Profit = Total Revenue (TR)
Markets can fail by themselves when:
Demand curves do not reflect full benefits of
Supply curves do not reflect full costs of
producing the good.
Rivalry: when consumption of a good
What trades should be made?
What if the quantity sold in the market occurs
where MV (MB) > MC?
There are trades left undone which could
benefit consumers and producers because a price
can be found where MB > P and P > MC.
Resources are underutilized in th
What is economics?
Wants: we desire unlimited resources.
Scarcity: resources are limited.
Economics: the study of how society obtains and
distributes resources in the presence of scarcity.
Microeconomics: focuses on decision making and
outcomes of individ