chapt 11 econ lec notes

chapt 11 econ lec notes - 11-1 Chapter 11 Production Output...

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Unformatted text preview: 11-1 Chapter 11 Production, Output and Costs Objective of Firms: 11-2 Economic Profit 11-3 Short Run -period of time in which at least one input is fixed Long Run - Period of time when all inputs are variable 11-4 Technological Constraints in the Short Run 11-5 Total Product (TP): 11-6 Table 1: Total Product (TP) Labour Total Product 1 2 3 4 5 6 7 8 o See Diagram 1: Total Product 2 4 6 8 10 12 14 16 18 20 22 24 26 1 2 3 4 5 6 7 8 9 Labour TP 11-7 Diagram 1: Total Product 11-8 Marginal Product (MP):- The change in total product that results from a 1-unit increase in the quantity of labour employed- Change in total product- ÷- Change in the quantity of labour- MP=(change in) TP/ (change in) labour 11-9- Table 2: Marginal Product Labour Total Product MP = ∆TP/∆L — 1 1 1 2 3 2 3 6 3 4 12 6 5 17 5 6 20 3 7 22 2 8 23 1 o See Diagram 2: Marginal Product 11-10 Diagram 2: Marginal Product Point of diminishing marginal productivity 11-11 1 2 3 4 5 6 7 1 2 3 4 5 6 7 8 Labour MP 11-12 Law of Diminishing Returns-as a firm uses more and more of a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases 11-13 Law of Diminishing Returns – Example: -too many cooks spoil the broth 11-14 Average Product (AP):- Total product divided by the quantity of an input- Total product/ quantity of labour...
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chapt 11 econ lec notes - 11-1 Chapter 11 Production Output...

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