Economics 1021A/B Lecture Notes - Lecture 8: Oligopoly, Perfect Competition, Economic Efficiency

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Rivers

Document Summary

Quiz on friday: chapter 6 and chapter 9. A firm is an institution that hires factors of production and organizes them to produce and sell goods and services. Economic profit is equal to total revenue minus total cost with total cost measured as the opportunity cost of production. A firm"s opportunity cost of production is the value of the best alternative use of the resources that a firm uses in production. This is the sum of the cost of using resources. Supplied by the firm"s owner (profit for entrepreneurship) Economic efficiency occurs when the firm produces a given level of output at the least cost. The economically efficient method depends on the relative cost of production resources (capital and labour) To maximize profit, a firm must make five basic decisions: How to organize and compensate it"s managers and workers. What to produce itself and what to buy from other firms.