NJC 2025 SH1 H2 Econ Ch4A Seminar Notes (Final)

CHAPTER 4A (H2 only) OVERVIEW ................................................................................................................................................................... 1 1. FIRM, PLANT AND INDUSTRY ........................................................................................................................... 2 2. TRADITIONAL OBJECTIVE OF FIRMS: PROFIT MAXIMISATION............................................................ 2 2.1 TOTAL REVENUE, TOTAL COSTS AND PROFIT .................................................................................... 3 2.2 ACCOUNTING PROFIT AND ECONOMIC PROFIT .................................................................................. 3 2.3 PROFIT MAXIMISATION AND THE MARGINALIST PRINCIPLE ...................................................... 6 3. COSTS OF PRODUCTION IN THE SHORT RUN .............................................................................................. 7 3.1 FIXED AND VARIABLE COSTS AND THE SHORT RUN ........................................................................ 7 3.2 SHORT RUN COSTS ........................................................................................................................................ 9 3.2.1 TOTAL FIXED COSTS, TOTAL VARIABLE COSTS AND TOTAL COST ................................... 9 3.2.2 AVERAGE FIXED COST, AVERAGE VARIABLE COST AND AVERAGE COST ..................... 10 3.2.3 MARGINAL COST (MC) .................................................................................................................... 11 3.2.4 ILLUSTRATION OF COSTS IN A DIAGRAM ................................................................................ 11 4. COSTS OF PRODUCTION IN THE LONG RUN.............................................................................................. 15 4.1 FROM THE SHORT RUN TO THE LONG RUN AVERAGE (LRAC) CURVE .................................... 17 4.2 ECONOMIES AND DISECONOMIES OF SCALE ..................................................................................... 20 4.2.1 INTERNAL ECONOMIES AND DISECONOMIES OF SCALE ................................................... 21 4.2.2 EXTERNAL ECONOMIES AND DISECONOMIES OF SCALE ................................................... 28 5. ALTERNATIVE OBJECTIVES OF FIRMS ........................................................................................................ 32 6. ANNEX………………………………………………………………………………………………………………………………... 36 Firms and Firms and Decisions : Objectives of Firms and Costs of Production

2025 SH1 H2 Economics Chapter 4A National Junior College: Economics Department H2 Economics (9570) 1 OVERVIEW OF CHAPTER To economists, production is the transformation of inputs into outputs that yield satisfaction directly to the consumers. The transfor