The Cost of Production We will now start to explain where the supply curve comes from. But remember before a firm can actually supply something it has to produce it. The objective of the firm is to maximize profit. If you remember we already talked about the concept of profit.
Production can only occur at some cost.
We said before that there are several types of cost and that an economist definition of cost differs from what an accountant would consider to be cost. As a result profit will be different from an economists point of as compared to what an accountant would consider profit. These are the payments to labor, suppliers and all the other factors of production. If you were an accountant you would look only at explicit cost. When we look at implicit cost we consider the returns that go to the firm or to the owner of the firm.