1. eFarmer.us Production Function - Hay Copyright 2009 eStudy.us michael.roberson@eStudy.us Production Function shows the relationship between the level of inputs used to produce output ―Labor to cars ―Water to hay ―Grass to beef at least one fixed input the production function is a short run concept

2. eFarmer.us Production Function - Hay Tractor and Wagon Implies Maximum Output per Worker Copyright 2009 eStudy.us michael.roberson@eStudy.us Labor Hay per Hour 0 1 2 3 4 5 6 7 0 10 25 50 65 75 80 10 15 25 15 10 5 0 $8/10= $8/15= $8/25= $8/15= $8/10= $8/5= Wage = $8 0.80 0.53 0.32 0.53 0.80 1.60 - A fixed resource - Production efficiency Marginal Product (MP): output produced by using one more variable input Diminishing Marginal Product MP increasing at a decreasing rate

3. eFarmer.us Production Function - Hay Copyright 2009 eStudy.us michael.roberson@eStudy.us Diminishing Marginal Product Using the Hay example 0.32 Minimum Marginal Cost corresponds to maximum Marginal Product 50 0.80 10 MP 123456 25 Hay Workers MC 102550657580 Hay $ TP 123456 Workers Hay

4. eFarmer.us Cost Curves - Hay Copyright 2009 eStudy.us michael.roberson@eStudy.us LaborHayMPWageTFCTVCTCAFCAVCATCMC 00$8$5$0$5$0.00 110 $8$5$8$13$0.50$0.80$1.30$0.80 22515$8$5$16$21$0.20$0.64$0.84$0.53 35025$8$5$24$29$0.10$0.48$0.58$0.32 46515$8$5$32$37$0.08$0.49$0.57$0.53 57510$8$5$40$45$0.07$0.53$0.60$0.80 6805$8$5$48$53$0.06$0.60$0.66$1.60 MC AVC ATC

5. eFarmer.us Production and Cost - Hay Copyright 2009 eStudy.us michael.roberson@eStudy.us LaborHayMPWageMC 00$8 110 $8$0.80 22515$8$0.53 35025$8$0.32 46515$8$0.53 57510$8$0.80 6805$8$1.60 MC AVC ATC Minimum MC is consistent with Maximum MP MP