The learning objectives for this chapter are as follows:
- Describe the firm’s production decision, specifically the conditions under which the firm will enter the market and the conditions under which the firm will exit the market.
- Express the firm’s profit maximization problem in terms of revenue and cost.
- Describe and explain the logic of the firm’s profit maximization condition (MR = MC).
- Explain the idea of opportunity cost.
- Identify variables that shift the supply schedule. Be able to predict the direction of the shift.
- Distinguish between competing products in production and joint products in production. Provide examples of each.
- Explain the derivation of input demands from profit maximizing input choices, and describe variables that shift demand schedules for inputs.
- Explain producer surplus and compute producer surplus given a linear supply schedule.