The Cost and Supply of Goods

Firms do three things: purchase productive resources from households/firms, transform them into a different commodity, and sell the transformed product/service to consumers. In a market economy, all these steps are up to the firm's discretion (after all, in privately owned firms, it is the owners who invest their funds and are in other words risking their financial future). Incentives depend on the organization of the firm. The owner's who risk their wealth are the residual claimants, meaning that they receive the excess of revenue over costs. In this case the incentives are aligned such that the success of the business is in the best interest of the owners i.e., they will see to it that managers/employees use resources efficiently and produce value greater than the costs. This sort of productive activity can be organized in two ways: contracting and team production. Team production reduces transaction costs but lowers the incentive for individual employees to contribute their best (so incentives like bonuses are set in place to keep employees from shirking), whereas contracting could, in theory, be the only way to accomplish production. However, both methods are used in actual production.

What does...

...the Buddha, Gandhi, Pythagoras, Plato, Socrates, Einstein, Franklin, Lord Byron, Shelley, Thoreau, Dostoevsky, Edison, C. S. Lewis, Tolstoy, Mill, Hugo and the Dalai Lama have in common? The recognition of the moral significance of non-human animals, as reflected in their writings and dietary choices. Many are veg*n, or inspire such refinement. Hardly à la mode.