If you are an in-class student you should record the number of points you missed on each course objective on the cover of your exam as we review the results during Module 6.1.

 12.1   Explain how economists measure a firm's cost of production and profit.

 12.2   Explain the relationship between a firm's output and labor employed in the short run.

 12.1   Explain how economists measure a firm's cost of production and profit.

A.  Firms seek to maximize economic profit, which is total revenue minus total cost.
B.  Total cost equals opportunity cost - the sum of explicit costs plus implicit costs and includes normal profit.

 12.2   Explain the relationship between a firm's output and labor employed in the short run.

A.  In the short run, the firm can change the output it produces by changing labor only.
B.  A total product curve shows the limits to the output that the firm can produce with a given quantity of capital and different quantities of labor.
C.  As the quantity of labor increases, the marginal product of labor increases initially but eventually decreases - the law of decreasing returns.

Take the optional post-study bonus point quizzes on Production and Cost on Saturday following Module 6.

Take the optional pre-study bonus point quizzes on Perfect Competition on Sunday preceding Module 7.

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