Production one variable input production one variable

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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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