PADP 6950 Lecture Notes - Lecture 7: Production Function, Root Mean Square, Isocost

• School: University of Georgia
• Department: Public Administration and Policy
• Course: PADP 6950
• Professor: Emily Lawler

Document Summary

Lecture 7 : theory of the firm: the firm, an organization that transforms inputs into outputs, objective > to minimize the cost of producing the quantity it has decided to produce & to maximize pro ts. Pro t = total revenue (tr) - total cost (tc: signi cance of the firm. Decisions made by rms affect goods & services they produce that the public consumes: understanding rm behavior is essential for comprehensive knowledge of markets. Short run > some of inputs are in xed supply (usually assume capital is xed) Long run > all inputs can be freely chosen. Firm technology technological constraints on what rm can produce: production function > mathematical relationships describing how much output can be made form different combinations of inputs. Usual assumptions (a) monotonic > increasing the amount of at least one of the inputs should make possible the production of at least as much output that was produced w/o it.