文档介绍：Chapter 6
Production
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Chapter 1
Topics to be Discussed
The Technology of Production
Isoquants
Production with One Variable Input (Labor)
Production with Two Variable Inputs
Returns to Scale
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Chapter 1
Introduction
Our focus is the supply side.
The theory of the firm will address:
How a firm makes cost-minimizing production decisions
How cost varies with output
Characteristics of market supply
Issues of business regulation
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Chapter 1
The Technology of Production
The Production bining inputs or factors of production to achieve an output
Categories of Inputs (factors of production)
Labor
Materials
Capital
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Chapter 1
The Technology of Production
Production Function:
Indicates the highest output that a firm can produce for every bination of inputs given the state of technology.
Shows what is technically feasible when the firm operates efficiently.
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Chapter 1
The Technology of Production
The production function for two inputs:
Q = F(K,L)
Q = Output, K = Capital, L = Labor
For a given technology
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Chapter 1
Isoquants
Assumptions
Food producer has two inputs
Labor (L) & Capital (K)
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Chapter 1
Isoquants
Observations:
1) For any level of K, output increases with more L.
2) For any level of L, output increases with more K.
3) binations of inputs produce the same output.
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Chapter 1
Isoquants
Isoquants
Curves showing all binations of inputs that yield the same output
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Chapter 1
Production Function for Food
1 20 40 55 65 75
2 40 60 75 85 90
3 55 75 90 100 105
4 65 85 100 110 115
5 75 90 105 115 120
Capital Input 1 2 3 4 5
Labor Input
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Chapter 1