0455

Firms' Costs, Revenue & Objectives

Microeconomic Decision Makers · 5 question types

Practise

Every firm faces the same basic question: do its revenues from selling its product exceed the costs of making it? If yes, the firm makes a and can survive and grow; if no, the firm makes a loss and will eventually leave the market.

This topic looks at:

  • the costs a firm pays to produce its output (fixed and variable),
  • the revenue it earns from selling that output,
  • the profit (or loss) that results,
  • how average changes as the firm grows (economies and diseconomies of scale),
  • and the objectives a firm's owners set for it.