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.