1. 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 by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

2. Production Function With Two Inputs
Q = f(L, K)
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

3. Production Function With Two Inputs
Discrete Production Surface
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

4. Production Function With Two Inputs
Continuous Production Surface
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

5. 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 by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

6. Production Function With One Variable Input
Total, Marginal, and Average Product of Labor, and Output Elasticity
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

7. Production Function With One Variable Input
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

8. Production Function With One Variable Input
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

9. 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 by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

10. Optimal Use of the Variable Input
Use of Labor is Optimal When L = 3.50
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

11. Optimal Use of the Variable Input
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

12. 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 by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

13. Production With Two Variable Inputs
Isoquants
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

14. Production With Two Variable Inputs
Economic Region of Production
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

15. Production With Two Variable Inputs
Marginal Rate of Technical Substitution
MRTS = -K/L = MPL/MPK
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

16. Production With Two Variable Inputs
MRTS = -(-2.5/1) = 2.5
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

17. Production With Two Variable Inputs
Perfect Substitutes
Perfect Complements
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

18. Optimal Combination of Inputs
Isocost lines represent all combinations of two inputs that a firm can purchase with the same total cost.
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

19. Optimal Combination of Inputs
Isocost Lines
AB C = $100, w = r = $10
A’B’ C = $140, w = r = $10
A’’B’’ C = $80, w = r = $10
AB* C = $100, w = $5, r = $10
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

20. Optimal Combination of Inputs
MRTS = w/r
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

21. Optimal Combination of Inputs
Effect of a Change in Input Prices
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

22. 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, the f has decreasing returns to scale.
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

23. Returns to Scale Constant Returns to Scale Increasing Returns to Scale
Decreasing Returns to Scale
PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

24. 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 by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.