lectureAssignment09 - 1 The material from this Lecture...

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The material from this Lecture Assignment is not part of Test 1. We will begin working on this LA in the short lecture after the test on November 13 th . You will want to bring a copy to the lecture. ECONOMICS 100 Lecture Assignment #9 (Theory of Production and Costs) Source: LR11and LR10, Chapters 7 and 8 (exclude appendix to Ch. 8). Background: We have just finished analyzing consumers’ desires for goods and services in order to understand the market demand schedule; now we move to producers’ decisions in order to understand the supply side of the marketplace. 1. The Firm 1.1 For our purposes, what is a firm ? 1.2 What assumption do we make about a firm’s behaviour? (Skim the Appendix for a detailed and interesting discussion of whether this assumption is reasonable!). 2. The Production Function We will assume a simple production function of the form q = q(K,L) where q is the quantity of output, K is one of the inputs ( capital ) and L is the other input (labour ). Note that we have simplified the production process down to a single output (i.e., a single good or service) produced from only two inputs. 2.1 How can the production function above be altered to reflect the very short run ? 2.2 Ditto for the short run . 2.3 Ditto for the long run . 2.4 Ditto for the very long run . 2.5 How are the costs of production (i.e., the costs of producing a certain level of output) related to the production function? Use the short run as an example. 1
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3. Theory of Production (in the Short Run) Consider the following Total Product (TP) schedule for "willies" produced on 1 acre of land, with labour input varying as shown. Only two inputs are required: land (which is fixed in the short run) and labour (which can vary). LABOUR (L) (units) TP L (# of "willies") AP L MP L 0 0 1 200 200 200 2 500 250 300 3 900 300 400 4 1200 300 300 5 1400 280 200 6 1500 250 100 7 1500 214 0 8 1400 175 -100 9 1200 133 -200 3.1 Fill in the schedules for Average Product (AP) of Labour and Marginal Product (MP) of Labour. [The math of this is simple, and the answers are provided
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lectureAssignment09 - 1 The material from this Lecture...

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