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they probably won’t see it after the standard treatment in their principles course.
82 Chapter Highlights
Production
A. Want to study production in a general equilibrium context
B. Robinson Crusoe economy
1. Robinson is both consumer and producer
2. consumes leisure and coconuts
C. Crusoe, Inc. — the firm’s choices
1. firm looks at prices and chooses a profit-maximizing plan
D. Robinson the consumer
1. Robinson collects profits as nonlabor income
E. In equilibrium, demand equals supply
1. demand for labor equals supply of labor
F. Decentralization
1. each “agent” in the economy only has to look at the prices and make his
own decisions
2. the consumer doesn’t have to know anything about the production problem
G. Different kinds of technologies
1. constant returns to scale — zero profits
H. Welfare theorems
1. First welfare theorem — competitive markets are Pareto efficient
I. Production possibilities
1. if there is more than one good, we can illustrate the production set. Figure
29.7.
82 Chapter Highlights
Production
A. Want to study production in a general equilibrium context
B. Robinson Crusoe economy
1. Robinson is both consumer and producer
2. consumes leisure and coconuts
C. Crusoe, Inc. — the firm’s choices
1. firm looks at prices and chooses a profit-maximizing plan
D. Robinson the consumer
1. Robinson collects profits as nonlabor income
E. In equilibrium, demand equals supply
1. demand for labor equals supply of labor
F. Decentralization
1. each “agent” in the economy only has to look at the prices and make his
own decisions
2. the consumer doesn’t have to know anything about the production problem
G. Different kinds of technologies
1. constant returns to scale — zero profits
H. Welfare theorems
1. First welfare theorem — competitive markets are Pareto efficient
I. Production possibilities
1. if there is more than one good, we can illustrate the production set. Figure
29.7.
