ECN 104 Lecture Notes - Lecture 8: Diminishing Returns, Petro-Canada, Sole Proprietorship
Document Summary
Ie coca cola"s bottling plants in multiple locations: all use the same formula, vertical combinations, firms that own plants that perform different functions in various stages of the production process. Ie petro canada: oil fields, refineries, retail stations: conglomerates, firms that have plants that produce products in several industries. Legal forms of businesses: sole proprietorship, partnership, corporation, advantages: pool financial resources of a large number of people, limited liability, easier access to bank credit, ease of expansion. Implicit costs: payments a firm must make, opportunity costs of firm"s own resources, include normal profits. Law of diminishing returns: as successive units of a variable factor are added to some fixed factors, beyond some point, the marginal product of that factor will diminish. If the average value is rising, the marginal value must be above the average value: mp > ap ap is rising. Marginal cost = change in tc/change in q: costs that the firm can control directly and immediately.
