Chapter 4 Cost and Production
In the previous two chapters we examined the economics underlying decisions related to which goods and services a business concern will sell, where it will sell them, how it will sell them, and in what quantities. Another challenge for management is to determine how to acquire and organize its production resources to best support those commitments. In this chapter and in the following chapter we will be discussing key concepts and principles from microeconomics that guide its organization and production activities to improve profitability and be able to compete effectively.
A number of highly useful methodologies have been developed based on the concepts and principles discussed. This text will not address specific techniques for tracking costs and planning production activities. Readers seeking guidance on these tasks might consult a text on cost accounting or operations management.Two classic texts on cost accounting and operations management are by Horngren (1972) and Stevenson (1986), respectively.