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lec12 - Technology and Production(chapter 8 • How do...

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2010-04-07 1 Technology and Production Technology and Production (chapter 8) How do firms decide the mixture of inputs to use to produce their goods? Deriving an Isoquant K input (Capital) More Output B 1 Slope of Isoquant = Marginal Rate of Technical Substitution Set of inputs yielding same quantity of output Q 0 =isoquant (equal output level) L input (Labor) A Less Output C 1 Properties of Isoquants Similarities with Indifference Curves Never slope up Never intersect Have nothing to do with prices Properties of Isoquants (II) Differences from Indifference Curves Do not measure utility or satisfaction! Slope reflects technology, not tastes Marginal Rate of Technical Substitution Isoquant Map Auto Production K (Robots) 24 16 Ford (2000) L (Labor) 6 6 12 12 20 A Q=10 isoquant 8 9 16 Q=12 isoquan Q= 8 isoquant Ford (1980)
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