Micro2_Chapter6

Micro2_Chapter6 - School of Business International...

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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 1 School of Business International University Mar 2009
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 2 Introduction ± Time: 3 hrs ± Readings: ± Content: – The Production Function – Short-Run Analysis of Total, Average, and Marginal Product – Long-Run Production Function – Estimation of Production Functions – Importance of Production Functions in Managerial Decision Making
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 3 Learning Objectives ± Define production function and explain difference between short-run and long-run production function ± Explain “law of diminishing returns” and how it relates to the Three Stages of Production ± Define the Three Stages of Production and explain why a rational firm always tries to operate in Stage II
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 4 Joke of the Week ± A Chicago economist died in poverty and many local futures traders donated to a fund for his funeral. The president of the Merc, was asked to donate a dollar. "Only a buck?" said the president, "only a dollar to bury an economist? Here's a check; go bury a 1000 of them."
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 5 Learning Objectives ± Provide examples of types of inputs that might go into a production function for a manufacturing or service company ± Describe various forms of a production function that are used in statistical estimation of these functions ± Briefly describe the Cobb-Douglas function and cite a few statistical studies that used this particular functional form in their analysis
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 6 The Production Function ± Production function: defines the relationship between inputs and the maximum amount that can be produced within a given period of time with a given level of technology. ± Mathematically, the production function can be expressed as Q=f(X 1 , X 2 , . .., X k ) – Q: level of output –X 1 , X 2 , . .., X k : inputs used in the production process
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 7 The Production Function ± Key assumptions – Some given “state of the art” in the production technology. – Whatever input or input combinations are included in a particular function, the output resulting from their utilization is at the maximum level.
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 8 The Production Function ± For simplicity we will often consider a production function of two inputs: Q=f(X, Y) Q: output X: Labor Y: Capital
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education
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This note was uploaded on 07/15/2011 for the course ECON 101 taught by Professor Abcd during the Spring '11 term at RMIT Vietnam.

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Micro2_Chapter6 - School of Business International...

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