Abstract
The paper first cites Ronald Coase, who was awarded in 1991 the Nobel Prize in Economics, on his explanation why he studied accounting and not economics while a student at the London School of Economics from 1929-1931. It then explores the relationship between the diagrams of microeconomics and the balance sheet and income statement for a price-taking firm as management responds to a price change in the short and long run. Accounting and economic depreciation are distinguished. Finally the relationship between profit maximization and maximization of the firm's contribution margin is explored.
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