Chapter 6 Production
Chapter 6 Production
Topics to be Discussed a The Technology of Production ■| soquants a Production with One Variable Input Labor a Production with Two Variable Inputs ■ Returns to scale Chapter 6 Slide 2
Chapter 6 Slide 2 Topics to be Discussed ◼ The Technology of Production ◼ Isoquants ◼ Production with One Variable Input (Labor) ◼ Production with Two Variable Inputs ◼ Returns to Scale
Introduction a Our focus is the supply side a The theory of the firm will address o How a firm makes cost-minimizing production decisions o How cost varies with output o Characteristics of market supply o Issues of business requlation Chapter 6 Slide 3
Chapter 6 Slide 3 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
The Technology of Production a The Production process Combining inputs or factors of production to achieve an output a Categories of Inputs(factors of production) Labor Materials ● Capital Chapter 6 Slide 4
Chapter 6 Slide 4 The Technology of Production ◼ The Production Process ⚫ Combining inputs or factors of production to achieve an output ◼ Categories of Inputs (factors of production) ⚫ Labor ⚫ Materials ⚫ Capital
The Technology of Production ■ Production Function o Indicates the highest output that a firm can produce for every specified combination of inputs given the state of technology. o Shows what is technically feasible when the firm operates efficiently Chapter 6 Slide 5
Chapter 6 Slide 5 The Technology of Production ◼ Production Function: ⚫ Indicates the highest output that a firm can produce for every specified combination of inputs given the state of technology. ⚫ Shows what is technically feasible when the firm operates efficiently