Lecture 3

Question 1

Firm

Answer 1

• An economic organisation in which private owners of capital goods hire and direct labour to produce goods and services for sale on markets to make a profit
• Non profit organisations, employee owned cooperatives, government owned entities are not firms

Question 2

A firm is a way of organising production with the following characteristics:

Answer 2

• One or more individuals own a set of capital goods that are used in production
• They pay wages and salaries to employees
• They direct the employees (through the managers they also employ) in the production of goods and services
• They goods and services are the property of the owners
• The owners sell the goods and services on markets to make with the intention of making a profit

Question 3

Isoprofit curve

Answer 3

Shows all combinations of price and quantity that give the same profit