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1、郑重声明 此课件只能用于同学自己学习参考，未 经书面授权不得做其他用途，尤其是不得做 商业用途，也不得作为教学课件使用（对他 人授课）。 课件作者 Chapter 6 Production Chapter 7 Cost Technological relationship on supply side of market Inputs -Outputs Outputs varies with inputs-production theory (chapter 6) Inputs and relevant costs varies with outputs- cost theory (chapt
2、er 7) Chapter 6 Production (and Business Organization) 1. Production Function and Basic Concepts1. Production Function and Basic Concepts 1.1 The Function Used to describe relationship between inputs and outputs Q = f ( X1, X2, X3, X4, . ) Maximum output, from any set of inputs Short run and long ru
3、n Q=f( X1, X2, X3, X4, . ) , ALL factors variable Q = f ( X1, X2, X3, X4, . ) FIXED IN SR VARIABLE IN SR 1.2 Some Particular Production Functions A function is homogeneous of degree-n, if multiplying all inputs by , increases the dependent variable byn Q = f ( K, L) So, f(K, L) = n Q A Useful Specif
4、ic function: Cobb-Douglas Production Q = A K L Cobb-Douglas Production Functions are homogeneous of degree + Q = f ( K, L) for two input case 1.3 Basic Product Concepts Average Product = Q / L output per labor, which is variable Marginal Product = Q/ L = dQ/dL output attributable to last unit of lab
5、or applied Total Product 1.4 Time Horizon in Production Short runShort run-a period that at least one input can change while at least another input do not have enough time to change. Long runLong run-a period long enough for all inputs to change as producers please. The very long runThe very long ru
6、n-In addition to inputs, technology changes 2. Short-Run Production: Law of Diminishing Return Marginal Product L 1 2 3 4 5 Average Product Think about average grade of whole the class and grade of new entrants. Alpha Beta Gama Delta Epsilon Grade 90 80 70 80 100 Average 90 85 80 80 84 L Total Outpu
7、t Marginal Product L Average Product Inflection point How outputs changes with changes in one input? vWhen MP AP, then AP is RISING If your marginal grade in this class is higher than your average grade point average, then your G.P.A. Is rising vWhen MP 1, then IRS 3.4 Reason for Returns to Scale In
8、creasing Return to Scale: vProduct-specific economies specialization learning curve effects. vPlant-specific economies Indivisibility of Lumpy Equipment Economies in overhead Economies in required reserves and investment (maintenance) economies of scope (interactions among products). vFirm-specific
9、economies economies in distribution and transportation of a geographically dispersed firm, or economies in marketing, sales promotion, or R Rising price of materials; Growing demand Potential Rival Stay outsideEnter Duponts Strategy Maintain high price Dupont：100 Rival：0 Dupont ：60 Rival ：40 Price c
10、utDupont ：50 Rival ：0 Dupont：50 Rival ：-5 Duponts Threat as a Strategy Potential Rival Stay outsideEnter Duponts Strategy Maintain high price Dupont：100 Rival：0 Dupont ：10 Rival ：40 Price cutDupont ：50 Rival ：0 Dupont：20 Rival ：-5 Examples of Sunk Cost Conduct a desperate fight (throw away the scabb
11、ard ) Maos Courage Blind knight Courage of a man suffering incurable disease Football ticket or movie What is the true cost of attending this course? Sell refrigerator 1.5 Summary Economic cost = explicit cost + implicit cost Both explicit and implicit cost are measured by opportunity cost Sunk cost
12、 is excluded from economic cost In economic cost is included normal profit Normal profit is understood opportunity cost of running the business project or investment program The lowest cost of different possibilities (a technical concept) 2. Short Run Costs 2.1 Various Short Run Costs TC = FC + VC f
13、ixed when MC is equal to AC, AC reaches its lowest point. Relationship between AVC and MC: The same as that of AC and MC. Relationship bt. MC and TC: Falling MC corresponds to concave TC, implying that TC increases at at a smaller and smaller speed; increasing MC is consistent with convex TC, implyi
14、ng that TC rises at a increasing rate. 3. Long Run Costs 3.1 Facts about LR Costs In Long Run, ALL inputs are variable LR costs are also U- shaped LR cost curves are ENVELOPE of SR cost curves LR cost curve are FLATTER than SR cost curves Q LRAC LRMC SRAC1 SRMC1 Long Run Cost Functions: Envelope of
15、SRAC curves Q SRAC-small capital SRAC-med. capital SRAC-big capital LRAC-Envelope of SRAC curves Ave Cost Q1 3.2 Why Economists think that the LRAC is U-shaped Law of Returns to Scale Decreasing LRAC corresponds to IRS Increasing LRAC corresponds to DRS Flat LRAC corresponds to CRS 4. Choice of Inpu
16、ts by the Firm: Optimal Inputs Combination Goal: Minimizing cost subject to given output Least Cost Rule: MPX/CX = MPY/CY. That is, the marginal product per dollar in each use is equal. Substitution rule: MPMPworker worker MPMPcomputer computer Can cost be reduced and how? Spending on labor Spending
17、 on capital C C workerworker C C computercomputer 30/10=350/25=2 30/10=350/10=5 30/15=250/25=2 Use of the Least Cost Rule Is the following firm EFFICIENT? Suppose that: MP L = 30 MP K = 50 W = 10 (cost of labor) R = 25 (cost of capital) Labor: 30/10 = 3 Capital: 50/25 = 2 A dollar spent on labor produces 3, and a dollar spent on capital produces 2. USE RELATIVELY MORE LABOR If spend $1 less in capital, output falls 2 units, but rises 3 units when spent on labor