ECON 1050 Chapter Notes - Chapter 11: Clent, Variable Cost

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The firm makes many decisions to achieve its main objective: profit maximization. Some decisions are critical to the survival of the firm. Some decisions are irreversible (or very costly to reverse) Other decisions are easily reversed and are less critical the survival of the firm, but still influence profit. 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. For most firms, the capital, called the firm"s plant, is fixed in the short run. Other resources used by the firm (such as labour, raw materials, and energy) can be changed in employed. The table shows a firm"s product schedules. As the quantity of labour employed increases: total product increases, marginal product increases initially but eventually decreases, average product decreases.

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