A Production function Quantity of Output (cookies per hour) 150 Production function 140 130 120 110 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 Number of workers hired H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. A Production Function... Quantity of Output (cookies per hour) 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 1 2 3 4 5 Number of Workers Hired Production function
Diminishing Marginal Product o The slope of the production function measures the marginal product of an input, such as a worker. When the marginal product declines, the production function becomes flatter H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Diminishing Marginal Product uThe slope of the production function measures the marginal product of an input, such as a worker. uWhen the marginal product declines, the production function becomes flatter
From the production function to the Total-Cost curve o The relationship between the quantity a firm can produce and its costs determines pricing decisions. o The total-cost curve shows this relationship graphically. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. From the Production Function to the Total-Cost Curve uThe relationship between the quantity a firm can produce and its costs determines pricing decisions. uThe total-cost curve shows this relationship graphically
A Production Function and Total Cost Number of Output Marginal Cost of Cost of Total cost of Workers Product of Factory Workers Inputs 0 $30 $30 0123 50 50 30 10 40 90 30 20 50 120 30 30 30 60 4 140 30 150 10 30 50 80 Hungry Helen's Cookie Factory H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. A Production Function and Total Cost Number of Workers Output Marginal Product of Labor Cost of Factory Cost of Workers Total Cost of Inputs 0 0 $30 $0 $30 1 50 50 30 10 40 2 90 40 30 20 50 3 120 30 30 30 60 4 140 20 30 40 70 5 150 10 30 50 80 Hungry Helen’s Cookie Factory
Total-Cost Curve Total Cost al-cost $80 rve 70 60 50 40 30 20 10 0 20 40 60 80 100 120 140 Quantity of Output H arc Inc items and derived items copyright o 2001 by Harcourt, Inc (cookies per hour)
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Total-Cost Curve... Total Cost $80 70 60 50 40 30 20 10 Quantity of Output (cookies per hour) 0 20 40 60 80 100 120 140 Total-cost curve