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p. 283. Producerslocked

  • Avinash Dixit


‘Producers’ addresses production, an activity that transforms inputs (raw materials and other produced goods, as well as services of labour, land, and capital) into outputs. Producers must pay attention to the costs of these inputs — the prices of inputs that are used up, as well as wages, rents, and costs of capital — which involves judgement about uncertain prospects. Supply curves, pricing strategies, rivalry between firms, supply chains, and firm organization are considered. Firms buy some inputs to their production from other firms and make some inputs in-house. The choice is theirs. But why not produce each link of the supply chain in a separate firm? Or why not make everything in-house?

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