technology - Technology 116 Technology A. Need a way to...

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Technology 116 Technology A. Need a way to describe the technological constraints facing a firm 1. what patterns of inputs and outputs are feasible? B. Inputs 1. factors of production 2. classifications: labor, land, raw materials, capital 3. usually try to measure in flows 4. financial capital vs. physical capital C. Describing technological constraints 1. production set --- combinations of inputs and outputs that are feasible patterns of production 2. production function --- upper boundary of produc- tion set 3. see Figure 17.1. 4. isoquants --- all combinations of inputs that produce a constant level of output 5. isoquants (constant output) are just like indiffer- ence curves (constant utility)
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Technology 117 y = OUTPUT Production set y = f ( x ) = production function x = INPUT Figure 17.1 D. Examples of isoquants 1. fixed proportions --- one man, one shovel 2. perfect substitutes --- pencils 3. Cobb-Douglas --- 4. can’t take monotonic transformations any more! E. Well-behaved technologies
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technology - Technology 116 Technology A. Need a way to...

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