Lecture12 - • Division of labor and specialization •...

Info icon This preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 12 Isoquants Returns to Scale Scale economies in production Marginal technical rate of substitution
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Isoquants An isoquant is a curve showing the different combination of inputs that leads to a constant output level. An isoquant map is a family of such curves. Labor Capital q = 10 q = 20 q = 30
Image of page 2
Returns to scale How does an increase in all inputs relate to an increase in output? q(aL, aK) = aq (L, K) → constant returns to scale q(aL, aK) > aq (L, K) → increasing returns to scale q(aL, aK) < aq (L, K) → decreasing returns to scale 10 20 10 20 q=100 q = 200 10 20 10 20 q = 100 q = 250 10 20 10 20 q = 100 q = 150
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Reasons for scale economies/diseconomies
Image of page 4
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: • Division of labor and specialization • Engineering attributes • Management and coordination • Advertising – depends on the venue • Example: Beer versus wine Substituting inputs over time • The long-run and short-run: a mix of inputs optimized for particular input prices may become suboptimal. • Example: automobile production in America and Japan Labor Capital q = 10 q = 20 q = 30 Substituting inputs: the marginal rate of technical substitution • MRTS = change in capital/change in labor for a fixed level of output = -∆K/∆L (for fixed q) Labor Capital ∆K ∆L (-1)*Slope of tangent line MRTS and Marginal Product...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern