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# ch8 - Chapter 8 Technology and Production Production...

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Chapter 8 Technology and Production Production Function The production function is a schedule that shows the highest level of output the firm can produce from given combination of inputs Inputs are labor (L) and capital (K). Output is labeled as Y. Algebraically, production function is Y=F(K,L) Example 1 Isoquant is a curve showing all of the input combinations that yield the same level of output K L L K F Y 2 3 ) , ( + = = Isoquant map is a collection of isoquants The decision-making horizon Some inputs can be adjusted in a couple of days; some inputs can be adjusted in months or years. We have to specify a planning horizon when we talk about fixed and variable factors of production. Variable factor is a factor whose level can be varied in the relevant planning horizon Fixed factor is a factor whose level can not be varied in the relevant planning horizon Short run is a period of time when only one of the firm's inputs is variable, while all others are fixed Long run is a period of time long enough that all

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ch8 - Chapter 8 Technology and Production Production...

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