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Unformatted text preview: n production” the price of inputs is simply the “market price” or the “contractual price”
which the firm takes as “exogenously given” (much like the consumer was a price taker). For example, according to the
HBS case The Aluminum Industry in 1994 the “average primary aluminum smelter” uses 1.24 tons of alumina to produce
1 ton of aluminum; given that the average smelter pays $190 per ton of alumina, the “input price” of alumina per ton of
per ton of aluminum.
● Instead of being leased and/or purchased and used up in production, some inputs (such as land and capital) are
“purchased/owned” to be used by the firm “as a means of production” over one or several periods. In contrast to
materials and electricity which are used up in production, land and capital (hereafter “capital”) are “durable” in the
sense that they can be used to “produce” output over time. For example, due to forecasted high demand, Air Canada
can lease aircraft(s) from the ILFC (in which case the “input price of an aircr...
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This document was uploaded on 01/19/2014.
- Fall '14