Tài liệu Production and Cost Analysis I doc

© 2003 McGraw-Hill Ryerson Limited.

Production and Cost

Analysis I

Chapter 9

© 2003 McGraw-Hill Ryerson Limited

9 - 2

Introduction

In the supply process, people first offer

the factors of production they control to

the market.

Then the factors are transformed by firms into goods that

consumers want.

Production occurs when factors of production (inputs) transform

into goods and services.

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9 - 3

The Role of the Firm

A firm is an economic institution that

transforms factors of production into

consumer goods and services.

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9 - 4

The Role of the Firm

A firm:

Organizes factors of production.

Produces goods and services.

Sells produced goods to individuals,

businesses or government.

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9 - 5

The Firm and the Market

A firm operates within the market and,

simultaneously, it abandons the market

in the sense that it replaces the market

with command and control.

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9 - 6

The Firm and the Market

How an economy operates depends on

transaction costs—costs of

undertaking trades through the market.