Chapter Outline

7.1 What are Firms?

7.2 Production, Costs, and Profits

7.3 Production in the Short Run

7.4 Costs in the Short Run

AFTER STUDYING THIS CHAPTER, YOU WILL BE ABLE TO

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 Learning Objectives (LO)

1. identify forms of business organization and methods of financing

firms.

2. distinguish between accounting profits and economic profits.

3. understand the law of diminishing marginal returns and the

relationships among total, average, and marginal product.

4. explain the difference between fixed and variable costs and the

relationships among total, average, and marginal costs.