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#cfa-level-1 #economics #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit #study-session-4
Factors of Production

A group of business investors are in the process of forming a new enterprise that will manufacture shipping containers to be used in international trade.

  1. What decisions about factors of production must the start-up firm make in beginning operations?

  2. What objective should guide the firm in its purchase and use of the production factors?

Solution to 1:

The entrepreneurs must decide where to locate the manufacturing facility in terms of an accessible site (land) and building (physical capital), what to use in the construction of the containers (materials), and what labor input to use.

Solution to 2:

Overall, any decision involving the input factors should focus on how that decision affects costs, profitability, and risk—such that shareholders’ wealth is maximized.

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3. ANALYSIS OF REVENUE, COSTS, AND PROFITS
l per unit of labor that additional laborers would possibly “get in each other’s way”. Point A is where TP is maximized. Exhibit 9. A Firm’s Production Function EXAMPLE 3 <span>Factors of Production A group of business investors are in the process of forming a new enterprise that will manufacture shipping containers to be used in international trade. What decisions about factors of production must the start-up firm make in beginning operations? What objective should guide the firm in its purchase and use of the production factors? Solution to 1: The entrepreneurs must decide where to locate the manufacturing facility in terms of an accessible site (land) and building (physical capital), what to use in the construction of the containers (materials), and what labor input to use. Solution to 2: Overall, any decision involving the input factors should focus on how that decision affects costs, profitability, and risk—such that shareholders’ wealth is maximized. 3.1.3. Total, Average, Marginal, Fixed, and Variable Costs Exhibit 10 shows the graphical relationships among total costs, to


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