ECON 1000 Lecture Notes - Lecture 10: Knitting Machine, Production Function, Diminishing Returns

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Gordana Colby

Document Summary

The rm makes many decisions to achieve its main objective: pro t maximization. Some decisions are critical to the survival of the rm. Some decisions are irreversible (or very costly to reverse) Other decisions are easily reversed and are less critical to the survival of the rm, but still in uence pro t. All decisions can be placed in two time frames: the short run, the long run. The short run is a time frame in which the quantity of one or more resources used in production is xed. For most rms, the capital, called the rm"s plant, is xed in the short run. Other resources used by the rm (such as labour, raw materials, and energy) can be changed in the short run. The long run is a time frame in which the quantities of all resources including the plant size can be varied. A sunk cost is a cost incurred by the rm and cannot be changed.