ch5 - Econ 106 Class notes Note d means derivative or...

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Econ 106 Class notes Note d means derivative or change Chapter 5. The Production Process and Costs A. Introduction: B. The Production Function. 1. Short Run Production. (1) K* (2) L (329 dL (4) Q = TP (529 dQ / dL= Μ P L Δ4/Δ 3 (6) Q/L = AP L 4/2 2 0 - 0 - - 2 1 1 4 4 4 2 2 1 10 6 5 2 3 1 18 8 6 2 4 1 24 6 6 2 5 1 28 4 5.6 2 6 1 30 2 5 2 7 1 30 0 4.29 2 8 1 28 -2 3.5

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a. Relationships between Productivity Measures. Graphs created from table on 1st page. 0 5 10 15 20 25 30 35 0 1 2 3 4 5 6 7 8 9 MP TP -4 -2 0 2 4 6 8 10 0 1 2 3 4 5 6 7 8 9 MP AP Increasing Decreasing Negative Marginal Marginal Marginal Returns Returns Returns b. The relationships between Marginals and averages. MP MP
c. Optimal Use of a Single Input. i. Rule (2) L (329 dL (4) Q = TP (529 dQ / dL = MP L (7) P Q (8) VMP L or MP L *P Q or 5*7 (9) W 0 - 0 - 1 1 4 4 100 400 300 2 1 10 6 100 600 300 3 1 18 8 100 800 300 4 1 24 6 100 600 300 5 1 28 4 100 400 300 6 1 30 2 100 200 300 Graphically -400 -200 0 200 400 600 800 1000 0 1 2 3 4 5 6 7 8 9 VMP L W

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ii. Comparative Statics w VMP = MP*P Q L \$ L L* w’ w VMP* L \$ L L* VMP = MP*P Q
2. Long Run Production

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ch5 - Econ 106 Class notes Note d means derivative or...

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