ECO205Y5 Chapter Notes -Variable Cost, Demand Curve, Marginalism
Document Summary
Firms exist to reduce down the cost for transportation and reduce time for each individual customer. Workers, who enjoy the negotiating benefits of unions, often arrive at contracts that specify in considerable detail what hours are to be worked, what work rules are to be followed, and what rate of pay can be expected. The primary reason that such incentives matter is that information about the actual performance of a firm"s managers or its employees may be difficult to observe. Economists usually treat the firm as a single decision-making unit. That is, the firm is assumed to have a single owner-manager who makes all decisions in a rather dictatorial way. If the manager of a firm is to pursue the goal of profit maximization, they must make the difference between the firm"s revenue and its total costs as large as possible. In making such calculations, the cost figure should include allowances for all opportunity costs.
