Factor Payment

What is a Factor Payment? For every factor of production (or input), there is an associated factor payment. Factor payments are what the firm pays for the use of the factors of production. From the firm’s perspective, factor payments are costs. From the owner of each...

Cost Function

What is the Cost Function? A cost function is a mathematical expression or equation that shows the cost of producing different levels of output. What we observe is that the cost increases as the firm produces higher quantities of output. This is pretty intuitive,...