• Unit 3: Producer Theory and Investment

    Every firm faces one primary constraint: a budget. The balance between costs and revenues will determine a firm's profit. Firms will seek to minimize costs; this implies that they are a profit maximizer. Every firm also has long and short run decisions. Remember that short run decisions allow for changing one of the factors of production, usually labor. Long run analysis is far more complex, because multiple factors of production are adjustable.

    Economic and market conditions change over time. A firm must carefully weigh expected changes in the future when making decisions today. Risk can vary over time and can be anticipated and insured against. Uncertainty is more difficult to model and can significantly change the overall environment.

    Completing this unit should take you approximately 12 hours.

    • Upon successful completion of this unit, you will be able to:

      • develop skills in doing economic cost analysis using calculus;
      • apply basic tools that are used in many fields of economics, including household economics, labor economics, production theory, international economics, natural resource economics, public finance, and capital markets; and
      • analyze the economic behavior of individuals and firms, and explore how they respond to changes in the opportunities and constraints that they face and how they interact in markets.