Handout4-MeasuringInputsProductivityandCosts

Handout4-MeasuringInputsProductivityandCosts - Relevant...

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Relevant time frames: short-run and long-run Short-run: At least one input cannot be changed – there is at least one fixed input factor of production As long as this is the case, as long as one input is not allowed to change, the relevant time frame is defined as the short-run Long-run: All input factors can change – no input is held constant or constrains the decision-making of the seller If sellers are permitted to make a change to all of the inputs, the relevant time frame is defined as the long-run
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Measuring the produc tivity of a variable input (example - labor) Total product - total quantity of a good or service produced as more units of labor are added to the production function Marginal product: The additional quantity of a good or service produced resulting from the addition of one more unit of labor (e.g. one more worker, or one more hour of labor) Formula: MP L = change in Q S / change in L (i.e. labor) Analysis approach: hold constant all other input factors - all other input factor are assumed to be fixed (isolates the influence of one input factor)
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This note was uploaded on 10/30/2010 for the course MBA 520 taught by Professor Mr.bill during the Spring '10 term at Ill. Chicago.

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Handout4-MeasuringInputsProductivityandCosts - Relevant...

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