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Unformatted text preview: oduced for a given level of inputs, or firm operates efficiently Q = A*F(L,K) I. Production: One Variable
Input Production: One
Variable Input We will begin looking at the short run when only one
input can be varied We assume capital is fixed and labor is variable Output can only be increased by increasing labor Must know how output changes as the amount of
labor is changed (Table 6.1) Graphing Output and Labor input Production Function Production: One Variable Input Q=F(L,K=fixed) Observations: 1.
2.
3. When labor is zero, output is zero as well
With additional workers, output (Q) increases up to 8
units of labor
Beyond this point, output declines Increasing labor can make better use of existing
capital initially After a point, more labor is not useful and can be
counterproductive 120
100
80
60
40
20
0
0 1 2 3 4 5 6 7 8 9 10 Labor 2 Average product of Labor We will study both MPL and APL Average product of Labor  Output per unit
of a particular product the marginal product of labor (MPL) Measures the productivity of a firm s labor
in terms of how much, on average, each
worker can produce the average product of labor (APL) Average production over a range of an input APL = Marginal Product of Labor Production: One Variable Input Marginal Product of Labor – additional
output produced when labor increases by
one unit Change in output divided by the change in
labor, derivative of Q w.r.t. L MPL = Graphing Output and Labor input Production Function We can graph the information in Table 6.1 to show How output varies with changes in labor Output is maximized at 112 units Average and Marginal Products Marginal Product is positive as long as total Q=F(L,K=fixed) MPL 120
100 MPL 80 Production: One Variable Input 60
40 output is increasing 20
0
0 1 2 3 4 5
Labor 6 7 8 9 10 Marginal Product crosses Average Product at its
maximum 3 Production: One
Variable Input
Output
per
Worker • Left of E: MP > AP & AP is increasing
• Right of E: MP < AP & AP is decreasing
• At E: MP = AP & AP is at its maximum
• At 8 units, MP is zero and output is at max 30 Marginal Product E 20 Average Product Marginal and Average
Product When marginal product is greater than the average
product, the average product is increasing When marginal product is less than the average
product, the average product is...
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 Fall '12
 COLLARD

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