Econ 2300 summer 2011 mark melatos. Topic 4 production costs june 7. A production function indicates the output, q, that a firm produces for every possible combination of inputs. Production functions describe the maximum output feasible for a given set of inputs technical efficiency. The sr production function takes the form: i. e. there is only one variable input, l. the amount of k is fixed. Marginal product of l: additional output produced as l is increased by 1 unit (holding k fixed) The lr production function takes the form: i. e. both k and l can be varied. Isoquant: a curve that shows all possible combinations of inputs that yield the same output: analogous to the indifference curves we looked at in consumer theory. Definitions: total cost = fixed cost + variable cost. Marginal cost (mc) = the extra cost incurred by producing an additional unit of.
