2 November 2009
Lecture 29
Reading: Ch. 5, pp. 177-185
Collect
Problem Set #9
HW Problem Set #10. Due Friday
(probably)
REVIEW___________________________________________________:
IV. Chapter 5. The Production Process and Costs
B. The Production Function.
1
.
Short Run Production.
c.
Optimal Use of a Single Input.
VMP = MRP = MP
L
P
Q
= P
L
ii. Comparative Statics
3. Long Run Production
a. Optimal Use of Multiple inputs
MP
L
/P
L
=
MP
K
/P
K
PREVIEW___________________________________________________
C. Costs.
1. The relationship of production functions to cost functions.
2. Short run costs.
a. Cost curves
1. TC, TVC and TFC
2. MC, AVC and ATC
b. The production decision for a firm: Produce Q where MR=MC.
LECTURE_______________________________________________________
C. Costs and the Theory of the Firm
1. The Relationship of Production Functions to Cost Functions.
To provide some context
for this discussion, consider the problem of producing blueberry tarts in my house.
We
may have the following relationship.
(a)
Inputs:
(Number of Workers)
(b)
Output
(Number of
Blueberry Pies)
(c)
Marginal
Pies
(d)
Marginal Costs Per pie (Assume
that labor costs $20 per unit, and
that ingredients are free)
0
0
1
5
5
$20/5 =$4
2
15
10
$20/10=$2
3
23
8
$20/8 = $2.5
4
29
6
$20/6 = 3.33
5
33
4
$20/5 =$5
This
preview
has intentionally blurred sections.
Sign up to view the full version.

This is the end of the preview.
Sign up
to
access the rest of the document.
- Fall '08
- SHRESTHA
- Economics, AFC, Marginal Marginal Costs
-
Click to edit the document details