Production_Theory - Production Theory And the Tragedy of...

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Production Theory And the Tragedy of the Commons
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The Production Process Inputs Production Outputs
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Inputs Fixed inputs do not change as output is changed Orchard (fruit trees are fixed inputs) Manufacturing (the factory is a fixed input) Variable inputs do change as output is changed Orchard (labor is a variable input) Manufacturing (labor and raw materials)
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Short Run vs. Long Run Fixed inputs remain fixed for the short run Orchard (new cherry trees are productive in year 4) Manufacturing (Add a machine in the short run or reconfigure production line in the long run) All inputs can be changed in the long run
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Short Run Production Function Variable Output Average Marginal input product product 0 0 1 100 2 180 3 240 4 280 5 300
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Production Function
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Average and Marginal Product
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Relationships Marginal product is the slope of the production function Average product is the slope of a ray to the production function Marginal and average Marginal > average: average rises Marginal = average: average constant Marginal < average: average falling
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Production_Theory - Production Theory And the Tragedy of...

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