ARE 2150 Lecture Notes - Lecture 6: Production Function, Factors Of Production, Marginal Product
29 Jan 2020
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Document Summary
Theory of the firm: explanation of how a firm makes cost-minimizing production decisions and how its cost varies with its output. The production decisions of firms are analogous to the purchasing decisions of consumers, and can likewise be understood in three steps: production technology, cost constraints, input choices. Firms offer a means of coordination that is extremely important and would be dorley missing if worker operated independently. Factors of production: impoust into the production process (ex. Production function: function showing the highest output that a firm can produce for every specified combination of inputs. q=f(k,l) Short run: period of time in which quantities of one or more production factors cannot be changed. Fixed input: production factors that cannot be varied. Long run: amount of time needed to make all production inputs variable. Average product: output per unit of a particular input.
