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SHUTDOWN RULE: A rule stating that firm minimizes economic loss by producing no output in the short run if price is less than average variable cost. In the short run, a firm incurs total fixed cost whether or not it produces any output. As such, if the market price is falls below average total cost, it must decide if the economic loss from producing the quantity of output that equates marginal revenue and marginal cost is more or less than the economic loss incurred with shutting down production in the short run (which is equal to total fixed cost).
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FIRM OBJECTIVES The standard economic assumption underlying the analysis of firms is profit maximization. Real world firms, however, might not, and many times do not, make decisions based on the profit-maximization objective, or at least exclusively on the profit-maximization objective. Other objectives include: (1) sales maximization, (2) pursuit of personal welfare, and (3) pursuit of social welfare.
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ORANGE REBELOON
[What's This?]
Today, you are likely to spend a great deal of time at an auction wanting to buy either decorative garden figurines or a wall poster commemorating last Friday (you know why). Be on the lookout for strangers with large satchels of used undergarments.
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This isn't me! What am I?
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The word "fiscal" is derived from a Latin word meaning "moneybag."
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"Something in human nature causes us to start slacking off at our moment of greatest accomplishment. As you become successful, you will need a great deal of self-discipline not to lose your sense of balance, humility and commitment." -- H. Ross Perot
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M&O
Management and Organization
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