ch3notes - Output and Employment Factors of Production...

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Output and Employment Factors of Production Aggregate Output Capital: K Employment of Labor: N Total Factor Productivity: A Summary Measure of Technology Summary Measure of ‘Other’ Inputs Aggregate Production Function A Typical Functional Form: 7 0 3 0 . . N AK Y = Marginal Products K: Additional Y per unit of Additional K N: Additional Y per unit of Additional N Marginal Products Are Positive . Marginal Products Diminish as Inputs Proportional Increase in Both Factors Proportional Increase in Y
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A Sample Production Function Y K N = 100 03 07 . . N\K 1 2 3 4 5 6 7 8 9 10 1 100 123 139 152 162 171 179 187 193 200 2 162 200 226 246 263 278 291 303 314 324 3 216 266 300 327 350 369 387 403 417 431 4 264 325 367 400 428 452 473 492 510 527 5 309 380 429 468 500 528 553 576 596 616 6 351 432 487 531 568 600 628 654 678 699 7 390 481 543 592 633 668 700 729 755 779 8 429 528 596 650 695 734 769 800 829 855 9 466 573 647 706 755 797 835 869 900 929 10 501 617 697 760 812 858 899 935 969 1000
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Calculating MPN A = 100, K = 5 Employment Output MPN 0 0 - 1 162 162 2 263 101 3 350 87 4 428 78 5 500 72 6 568 68 7 633 65 8 695 62 9 755 60 10 812 57
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ch3notes - Output and Employment Factors of Production...

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