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2.23.10 &acirc;€“ Lecture Notes, ECON 201

# 2.23.10 &acirc;€“ Lecture Notes, ECON 201 -...

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2.23.10 – Lecture Notes, ECON 201 FIRMS AND THE PRODUCTION OF G&S PART 1 We’ll analyze a real firm in the short-run   at least one input is fixed  An apple-producing farm in MI. The typical apple farm: 80 acres & 35,000 bushels of apples a year  The production function for apples on a MI farm can be written like this: Q(apples) = f(labor, fertilizer, tractor time, number and age of trees, etc.) The dependent variable is quantity of output (# of apples) The independent variables are quantities of inputs  FIXED AND VARIABLE INPUTS Fixed Inputs:  - Tractors - Trees Variable Inputs: - Spraying - Labor - Fertilizer  Normal apple trees take 14 years to bear fruit, but MSU made trees that bear fruit in 3 years!  Production Function is a GRAPH of Quantity Output (vertically) v. Labor Hours (horizontally) PART 2  Lots of these decisions are made at the margin

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2.23.10 &acirc;€“ Lecture Notes, ECON 201 -...

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