1 PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 1.

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Presentation transcript:

1 PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 1

2 PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 2

The Organization of Production Inputs Labor, Capital, Land Fixed Inputs Variable Inputs Short Run At least one input is fixed Long Run All inputs are variable PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 3

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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 5

PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 6

Production Function with One Variable Input Total Product TP = Q = f(L) MPL = TP L Marginal Product APL = TP L Average Product EL = MPL APL Production or Output Elasticity PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 7

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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 10

Optimal Use of the Variable Input Marginal Revenue Product of Labor MRPL = (MPL)(MR) Marginal Resource Cost of Labor TC L MRCL = Optimal Use of Labor MRPL = MRCL PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 11

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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 13

Production with Two Variable Inputs Isoquants show combinations of two inputs that can produce the same level of output. Firms will only use combinations of two inputs that are in the economic region of production, which is defined by the portion of each isoquant that is negatively sloped. PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 14

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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 17

Production with Two Variable Inputs Marginal Rate of Technical Substitution MRTS = -K/L = MPL/MPK PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 18

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Optimal Combination of Inputs Isocost lines represent all combinations of two inputs that a firm can purchase with the same total cost. PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 22

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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 25

Production Function Q = f(L, K) Returns to Scale Production Function Q = f(L, K) Q = f(hL, hK) If  = h, then f has constant returns to scale. If  > h, then f has increasing returns to scale. If  < h, then f has decreasing returns to scale. PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 26

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Empirical Production Functions Cobb-Douglas Production Function Q = AKaLb Estimated Using Natural Logarithms ln Q = ln A + a ln K + b ln L PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 29

Innovations and Global Competitiveness Product Innovation Process Innovation Product Cycle Model Just-In-Time Production System Competitive Benchmarking Computer-Aided Design (CAD) Computer-Aided Manufacturing (CAM) PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Slide 30

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