9-Production (I)

9-Production (I) - 1 Agenda • Course Overview •...

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Unformatted text preview: 8/20/2010 1 Agenda • Course Overview • Technology and Production • The Production Function • Isoquants and Optimal Input Mix • From Production to Cost • Returns to Scale and Economies of Scale • What To Take Away Microeconomics The Structure of the Course Consumers and Producers Market Interaction Today’s lecture Uncertainty Perfect competition Monopoly and Pricing strategies Competitive Strategy Auctions Information in Markets and Agency Game Theory Introduction to Markets Consumer Theory and Demand Technology and Production 8/20/2010 2 Agenda • Course Overview • Technology and Production • The Production Function • Isoquants and Optimal Input Mix • From Production to Cost • Returns to Scale and Economies of Scale • What To Take Away What should we do? Congratulations! You are the new CEO of Newco Telecom. Newco Telecom is a facilities-based Internet Service Provider operating out of Palm Springs. The only problem is that you don’t have any “facilities” yet. For that matter you are the first person the owner has hired and you are given the task of building the company. Good luck! Of course you need to understand how many customers you will be serving or be willing to serve. Marketing (i.e. You!) has not provided this information. Nevertheless you need to know how to organize the company for each possible number of customers , i.e. what equipment to buy, how many people to hire, how to organize production, etc.... You need a plan! 8/20/2010 3 Note that if there is only one person in Palm Springs interested in internet access then you may be able to do everything (install, operate the network, provide customer service, billing, etc…). If you think that you may need to serve more customers you may need to expand the network and hire more people. To benefit from task specialization you may need to reorganize how work is done (and coordinated). You can also automate many tasks or, conversely, some tasks can equally be performed manually. ― You could serve the same number of customer inquiries to your customer service center by automating the response or by having a person answering customers inquiries. ― Of course whether you do one or the other for a given number of customer calls will depend on the cost of capital needed for the new machines vs. the wage you pay workers at the call center . Production Plan Firm production decisions To design the production plan we need to understand: 1- Production Technology ( Engineering & Management ) – Describe how inputs can be efficiently transformed into outputs – Inputs: land, labor, capital and raw materials – Outputs: cars, desks, books, etc....
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This note was uploaded on 11/30/2010 for the course ECON 251 taught by Professor Tontz during the Fall '10 term at USC.

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9-Production (I) - 1 Agenda • Course Overview •...

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