In producer theory, how are costs of production derived? What are the three assumptions of producer theory? How are they related to scarcity? What role does the consumer play?

In a market economy, what do firms do? What are residual claimants? Differentiate between the three types of firms discussed in class.

Differentiate between the explicit, implicit costs that firms face. What are total costs? What sunk costs?

What is economic profit? How might it differ from accounting profit? Explain why firms that are making zero economic profit are likely to continue in business.

Which of the following statements do you think reflect sound economic thinking? Explain your answer.
a. "Because we own rather than rent, and the house is paid for, housing doesn't cost us anything."
b. "I own 100 shares of stock that I can't afford to sell until the price goes up enough for me to get back at least my original investment."
c. Private education is costly to produce, whereas public schooling is free."

What is the principal-agent problem? When will the principal-agent problem be most severe? Why might there be a principal-agent problem between the stockholders and the managers of a large corporation?