{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ch06 - Chapter 6 Inputs and Production Functions 1...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 6:  Inputs and Production Functions Chapter 6:  Inputs and Production Functions
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Definition:   Productive resources, such as labor and capital  equipment, that firms use to manufacture goods and  services are called  Definition:   The amount of goods and services produces by  the firm is the firm’s Definition:                      transforms a set of inputs into a set  of outputs Definition:                     determines the quantity of output that  is feasible to attain for a given set of inputs.   inputs  or  factors of production . output . Production Technology
Background image of page 2
3 Definition :          tells us  the  maximum  possible output that can be  attained by the firm for any given quantity of  inputs. The  production function Example:  Q = f(L,K,M) Example:  Q = f(P,F,L,A) Example:   Chips = f 1 (L,K,M)                         = f 2 (L,K,M)
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
4 Definition:      is  attaining the maximum possible output from its  inputs (using whatever technology is appropriate) technically efficient  firm
Background image of page 4
5 Example:   The Production Function and Technical  Efficiency Q = f(L) L Q C D A B Production Set Production Function
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
6 Definition:   The feasible but inefficient points below  the production function make up the firm’s Are firms technically efficient? Shirking, “perquisites” Strategic reasons for technical inefficiency Imperfect information on “best practices” “63% efficient” production set .
Background image of page 6
7 The variables in the production function are  flows  (the  amount of the input used per unit of time), not  stocks  (the  absolute quantity of the input). Example : stock of capital is the total factory installation;  flow of capital is the machine hours used per unit of time in  production (including depreciation). Capital refers to  physical capital   (definition:  goods that are themselves produced goods) and  not  financial capital  (definition : the money required to start  or maintain production).
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
8    Q =  (1/192)[K 2 -(1/36)K 3 ][L 2  – (1/36)L 3 ] Q = K 1/2 L 1/2
Background image of page 8
9 Production Function Q = K 1/2 L 1/2  in Table Form     K: L: 0 10 20 30 40 50 0 0 0 0 0 0 0 10 0 10 14 17 20 22 20 0 14 20 24 28 32 30 0 17 24 30 35 39 40 0 20 28 35 40 45 50 0 22 32 39 45 50
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
10 10 Production Function    Utility Function Output from inputs Preference level from purchases Derived from technologies Derived from preferences Cardinal(Defn: given amount of inputs yields a unique and specific amount of output) Ordinal Marginal Product Marginal Utility
Background image of page 10
11 11 Isoquant(Defn: all possible combinations of inputs that just suffice to produce a given amount of output) Indifference Curve Marginal Rate of Technical Substitution Marginal Rate of Substitution Production Function    Utility Function
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}