ECON101 Chapter Notes - Chapter 10: Limited Liability, Opportunity Cost, Perfect Competition

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Liton Chakraborty

Document Summary

Opportunity cost of production: resources bought in market, resources owned by firm. Funds used to buy capital could be used for some other purpose, and in their next best use could be used to earn interest: resources supplied by firms owner. Entrepreneurship: profit that entrepreneur earns on average is normal profit. Three features of a firm limit maximum economic profit it can make: technology constraints. Any method of producing a good or service. Includes detailed designs of machines and layout of the workplace. To increase technology, you must also increase costs: information constraints. Limited info about workforce, customers, competitors: market constraints. Quantity each firm can sell and price it can obtain are constrained by its customers willingness to pay and by the prices and marketing efforts of other firms. Technological efficiency occurs when a firm produces a given output by using the least amount of inputs. 10: d is the only method that is technologically inefficient.