Week5.ProductionandCosts.2007

Week5.ProductionandCosts.2007 - ECMA04H Week 5 Production,...

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Unformatted text preview: ECMA04H Week 5 Production, Productivity and Costs Tight week and our midterm test coming up (20%) When? Friday Oct. 26 at 3 p.m. Where? Soon, find out at: www.utsc.utoronto.ca/~cleveland/ECMA04H What if you miss it? Whats on the test? Up to end of Week 6 short run and long run costs faced by perfectly competitive firms Second test Friday, November 16 th at 3 p.m. (makeup test for those attending LIVE!) First, finish up material on excess burden of taxation..from last week. Production, productivity and costs Basic objective of this week.understand diminishing marginal productivity and the shapes of typical cost curves in short run. General objective: to understand the supply curve. Decisions by firms about how much to produce/supply. We assume that the objective of firms is to maximize profits! They hire labour and purchase (or rent) capital equipment and other inputs. These inputs combine together to produce output. Output is sold to earn a profit (or loss. ) Most firms, most of the time, have no control over the production technology available. They adopt existing technology. We write this as q = f(K,L) K = inputs of capital (machinery, buildings, etc) L = inputs of labour (hours of standardized worker) 5/7 An example of a production function: q = K...
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Week5.ProductionandCosts.2007 - ECMA04H Week 5 Production,...

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