Chapter 3 Firm Theory and Supply
If our ultimate goal is to study buyers and sellers together in markets, in this next section we will focus on the behavior of firms: producers, businesses, sellers of any kind. We will build up to a model of optimal decision making for firms by modeling and analyzing these components of firm behavior:
- firm production: how firms create output from inputs
- firm costs: how firms measure their costs of production
- optimal choice: how firms achieve their objective of maximizing profit
