Chương 7 Tổ chức kinh doanh và hành vi pps

The theory of supplyCosts of Firms’ decisions about how much output to supply depend upon the costs of production and the revenue they receive from selling the output... Some key terms■

Chapter 7

Business organization and behaviour

David Begg, Stanley Fischer and Rudiger Dornbusch, Economics,

6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith

The theory of supply

Costs of

Firms’ decisions about how much output to supply

depend upon the costs of production and the revenue they receive from selling the output.

Firm chooses

Forms of business organization

■ Sole trader

– owned by an individual entitled to income and

responsible for losses

■ Partnership

– jointly owned by two or more people

– unlimited liability

■ Company

– ownership divided among shareholders

– legal entitlement to produce and trade

– limited liability

– shares of public companies resold on the stock

exchange

Some key terms

■ Revenues

– the amount a firm earns by selling goods and services in a given period

■ Costs

– the expenses incurred in producing

goods and services during the period

■ Profits

A firm’s balance sheet

■ Assets

– what the firm owns

■ Liabilities

– what the firm owes

■ Balance sheet

– lists a firm’s assets and liabilities at a

point in time

Snark International balance sheet

31 December 2000

ASSETS LIABILITIES

Cash

Accounts receivable

Inventories

Factory building

(original value £250,000)

Other equipment

(original value £300,000)

£ 40,000 70,000 100,000 200,000 180,000

Accounts payable Salaries payable Mortgage from insurance company

Bank loan

Net worth

£ 90,000 50,000

150,000 60,000 _ 350,000 240,000

Costs and the economist

■ Accounting cost

– actual payments made by a firm in a period

■ Opportunity cost

– amount lost by not using a resource in its best alternative use

■ Supernormal profit

– profit over and above the return earned at the market rate of interest

■ Economists include opportunity cost in

a firm’s total costs

The production decision

■ For any output level, the firm attempts to

mimimize costs

■ Assume the firm aims to maximize profits

■ Profits depend on both COSTS and REVENUE

– each of which varies with the level of output

■ Marginal cost (MC) is the rise in total cost if

output increases by 1 unit.

■ Marginal revenue (MR) is the rise in total

revenue if output increases by 1 unit

Maximizing profits

E

MC

MR

0

If MR > MC, an increase

in output will increase profits.

If MR < MC, a decrease

in output will increase profits.

So profits are maximized

(so long as the firm covers variable costs)

Will firms try to maximize profits?

■ Large firms are not run by their owners

■ Managers may pursue different objectives

– e.g size, growth

■ But firms not maximizing profits may be

vulnerable to takeover