AGEC 105 Lecture Notes - Lecture 8: Variable Cost

• School: Texas A&M University
• Department: Agricultural Economics
• Course: AGEC 105
• Professor: Ariun Ishdorj

Document Summary

Topics of discussion: introduction to production and resource use, conditions for perfect competition, classification of inputs, production function and other physical relationships, law of diminishing marginal returns, economic dimension, key cost relationships, key input relationships. Non-renewable i. e minerals: all owner and hired labor services, excluding management. Capital: manufactured goods such as fuel, chemicals, tractors, and buildings. Management: production decisions designed to achieve specific economic goal. Output = f (labor i capital, land, and management: start with one variable input, assume all other inputs fixed at their current levels. The following derivatives of the total physical product (tpp) curve play an important role in decision making: marginal physical product. Change in output associated with a change in inputs: average physical product. Level of output divided by the level of input use. (cid:862)as su(cid:272)(cid:272)essi(cid:448)e u(cid:374)its of a (cid:448)aria(cid:271)le i(cid:374)put are added to a produ(cid:272)tio(cid:374) pro(cid:272)ess (cid:449)ith the other i(cid:374)puts held (cid:272)o(cid:374)sta(cid:374)t, the (cid:373)argi(cid:374)al physi(cid:272)al produ(cid:272)t (cid:894)mpp(cid:895) e(cid:448)e(cid:374)tually de(cid:272)li(cid:374)es(cid:863)