Analyzing Economic Issues (CIA4U)

Name: __________________

Unit 4 Outline
Theory of the Firm
Introduction
This unit introduces students
to the theory of the firm.
Students examine
production and cost curves,
economies of scale and types
of industries. Special
attention is given to a firm’s
profit maximizing condition
and market equilibrium in
the short and long run.

Big Questions
The main overarching question of this course is: How do individuals and societies make sense of
and assess economic information to make decisions?

By the end of this unit on the theory of the firm, you will be able to answer the following
question:

1. How do firms make production and hiring decisions?

2. How are a firm’s production and hiring decisions affected by the factor markets?
3. How do economies of scale affect a firm’s decision-making?

Assessment and Evaluation

Assessment for Learning Assessment of Learning Assessment as
(Formative) (Summative) Learning (Formative)
 Mind Map  Unit Test  Diagnostic
 Newspaper Analysis Worksheet
 Unit Quest (Google Form)  Teacher-Student
 Morton Workbook conferences
Activities
*See Learning Goals and Success Criteria Checklist at the end of this outline for more
information about our learning targets for this unit.*
 Analyzing Economic Issues (CIA4U)

Name: __________________

Key Terms, Concepts and Skills

Graphing & Numeracy Skills
1. Draw and interpret production and cost curves (Total product/cost and per unit
product/cost curves)
2. Determine the equilibrium quantity of workers to be hired by a firm and industry
(Marginal revenue product per dollar).
3. Draw and interpret economies of scale.

Key Vocabulary

Normal profit Total Product Total Fixed Cost

Economic profit Marginal Product Total Variable Cost
Accounting Marginal Returns (Increasing, Marginal Cost
profit Decreasing) Average cost (Total, fixed, variable)
Short Run Average Product Economies of Scale
Long Run Total Cost Diseconomies of Scale
Factor Market Derived Demand Constant Returns to Scale
Value of Marginal Product (Marginal
revenue product)

Unit 4: Theory of the Firm (Lesson Thread)

Content
The Profit Maximizers (Accounting vs.
Economic Profit, MC = MR)
Firm Product and Cost Curves
The Factor Markets (Labour)
Economies of Scale
 Analyzing Economic Issues (CIA4U)

Name: __________________

Pre-Learning Assessment

1) How do firms make production and hiring decisions?

Pre-Learning (What do you think you Curiosity (What questions do you have?)
know?)

Post-Learning (What do understand now?)

 Analyzing Economic Issues (CIA4U)

Name: __________________

2) How are firm’s production and hiring decisions affected by the factor markets?

Pre-Learning (What do you think you Curiosity (What questions do you have?)
know?)

Post-Learning (What do understand now?)

 Analyzing Economic Issues (CIA4U)

Name: __________________

3) How do economies of scale affect a firm’s decision making?

Pre-Learning (What do you think you Curiosity (What questions do you have?)
know?)

Post-Learning (What do understand now?)

 Analyzing Economic Issues (CIA4U)

Name: __________________

Learning Goals and Success Criteria Checklist

LEVEL of SUCCESS CRITERIA ACCOMPLISHED

UNDERSTANDING
How do firms make production and hiring decisions?
Uni-/multi-structural I can understand the difference between accounting
and economic profit.

I can explain what the law of diminishing marginal

returns means.

I can explain the difference between total and per-unit

calculations.

I understand why a firm’s profit maximizing point

occurs when MC = MR.

I know the difference between economies and

diseconomies of scale.

Relational I can apply the law of diminishing marginal returns to

firm hiring decisions.

I can compare a firm’s production decisions to other

marginal decisions in the economy (utility, market
equilibrium, externalities, etc…).
Extended abstract I can assess the effect of firm production and hiring
decisions on markets and the economy.

I can make meaningful connections between what I’ve

learned in economics and other subjects and the world
around me.
How are a firm’s production and hiring decisions affected by the factor markets?
Uni-/multi-structural I can understand how stakeholders (e.g. firms,
workers, savers, borrowers, etc...) respond to different
incentives in the factor markets.
Relational I can compare factor markets and understand how
they influence the product market.

I understand how factors markets influence the

Canadian economy.
Extended abstract I can assess whether or not our factor markets hinder
or help the Canadian economy.
How do economies of scale affect a firm’s decision-making?
 Analyzing Economic Issues (CIA4U)

Name: __________________

Uni-/multi-structural I know the difference between economies and

diseconomies of scale.

I can explain the difference between the short and

long run analysis.
Relational I can understand how economies of scale influence the
Canadian economy.
Extended abstract I can evaluate Canada’s economy using model of
economies of scale.