Varian_Chapter32_Production

Varian_Chapter32_Production - Chapter Thirty-Two Production...

Info iconThis preview shows pages 1–23. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter Thirty-Two Production Exchange Economies (revisited) No production, only endowments, so no description of how resources are converted to consumables. General equilibrium: all markets clear simultaneously. 1st and 2nd Fundamental Theorems of Welfare Economics. Now Add Production ... Add input markets, output markets, describe firms technologies, the distributions of firms outputs and profits Now Add Production ... Add input markets, output markets, describe firms technologies, the distributions of firms outputs and profits Thats not easy! Robinson Crusoes Economy One agent, RC. Endowed with a fixed quantity of one resource -- 24 hours. Use time for labor (production) or leisure (consumption). Labor time = L . Leisure time = 24 - L . What will RC choose? Robinson Crusoes Technology Technology: Labor produces output (coconuts) according to a concave production function. Robinson Crusoes Technology Production function Labor (hours) Coconuts 24 Robinson Crusoes Technology Labor (hours) Coconuts Production function 24 Feasible production plans Robinson Crusoes Preferences RCs preferences: coconut is a good leisure is a good Robinson Crusoes Preferences Leisure (hours) Coconuts More preferred 24 Robinson Crusoes Preferences Leisure (hours) Coconuts More preferred 24 Robinson Crusoes Choice Labor (hours) Coconuts Feasible production plans Production function 24 Robinson Crusoes Choice Labor (hours) Coconuts Feasible production plans Production function 24 Leisure (hours) 24 Robinson Crusoes Choice Labor (hours) Coconuts Feasible production plans Production function 24 Leisure (hours) 24 Robinson Crusoes Choice Labor (hours) Coconuts Feasible production plans Production function 24 Leisure (hours) 24 Robinson Crusoes Choice Labor (hours) Coconuts Production function 24 Leisure (hours) 24 C* L* Robinson Crusoes Choice Labor (hours) Coconuts Production function 24 Leisure (hours) 24 C* L* Labor Robinson Crusoes Choice Labor (hours) Coconuts Production function 24 Leisure (hours) 24 C* L* Labor Leisure Robinson Crusoes Choice Labor (hours) Coconuts Production function 24 Leisure (hours) 24 C* L* Labor Leisure Output Robinson Crusoes Choice Labor (hours) Coconuts Production function 24 Leisure (hours) 24 C* L* Labor Leisure MRS = MP L Output Robinson Crusoe as a Firm Now suppose RC is both a utility- maximizing consumer and a profit- maximizing firm. Use coconuts as the numeraire good; i.e. price of a coconut = $1. RCs wage rate is w . Coconut output level is C . Robinson Crusoe as a Firm RCs firms profit is = C - wL ....
View Full Document

This note was uploaded on 03/03/2011 for the course ECON 206 taught by Professor Ioanadan during the Spring '10 term at University of Toronto- Toronto.

Page1 / 114

Varian_Chapter32_Production - Chapter Thirty-Two Production...

This preview shows document pages 1 - 23. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online