Ch10old - Chapter 10 Output and Costs Objectives...

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Chapter 10: Output and Costs Objectives: Distinguish between the short run and the long run Explain the relationship between a firm’s output and labor employed in the short run Explain the relationship between a firm’s output and costs in the short run Derive and explain a firm’s short-run cost curves Explain the relationship between a firm’s output and costs in the long run Derive and explain a firm’s long-run average cost curve
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Decision Time Frames The firm makes many decisions to achieve its main objective: profit maximization . Some decisions are critical to the survival of the firm Some decisions are irreversible (or very costly to reverse) All decisions can be placed in two time frames: The short run The long run
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Decision Time Frames The Short Run The short run is a time frame in which the quantity of one or more resources used in production is fixed. For most firms, the capital, called the firm’s plant , is fixed in the short run. Other resources used by the firm (e.g., labor and raw materials) can be changed in the short run. Short-run decisions are easily reversed .
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Decision Time Frames The Long Run The long run is a time frame in which the quantities of all resources—including the plant size—can be varied. Long-run decisions are not easily reversed.
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Average Product (AP) Total Product (TP) Marginal Product (MP) Short-Run Marginal Product = Change in Total Product Change in Labor Input Average Product = Total Product Units of Labor
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Short-Run Table 10.1: Total Product, Marginal Product, and Average Product Labor Total Product Marginal Product Average Product (workers per day) (sweaters per day) (sweaters per additional worker) (sweaters per worker) A 0 0 - 4 B 1 4 4.00 6 C 2 10 5.00 3 D 3 13 4.33 2 E 4 15 3.75
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This note was uploaded on 04/03/2009 for the course ECON 2102 taught by Professor Bill during the Spring '08 term at Temple.

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Ch10old - Chapter 10 Output and Costs Objectives...

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