1. PRODUKSI DAN
BIAYA PRODUKSI
UNIVERSITAS GUNADARMA
MAGISTER MANAJEMEN
2007
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2. Produksi dan Biaya-biaya
Sasaran hasil:
Untuk menguji hubungan antara keluaran dan masukan
Untuk mengidentifikasi faktor penentu biaya yang paling utama
per unit
pemanfaatan kapasitas ekonomi
skala ekonomi
lingkup ekonomi
Mempelajari efek-efek yang terjadi
Untuk mengidentifikasi berbagai kesulitan yang dihadapi di
dalam penilaian empiris dari efek-efek ini
Untuk menjelaskan corak biaya-biaya yang tidak biasa di
sektor informasi
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3. OVERVIEW
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Production Functions
Total, Marginal, and Average Product
Law of Diminishing Returns to a Factor
Input Combination Choice
Marginal Revenue Product and Optimal Employment
Optimal Combination of Multiple Inputs
Optimal Levels of Multiple Inputs
Returns to Scale
Production Function Estimation
Productivity Measurement
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4. KEY CONCEPTS
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production function
discrete production function
continuous production function
returns to scale
returns to a factor
total product
marginal product
average product
law of diminishing returns
isoquant
technical efficiency
input substitution
marginal rate of technical
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ridge lines
marginal revenue product
economic efficiency
net marginal revenue
isocost curve (or budget line)
constant returns to scale
expansion path
increasing returns to scale
decreasing returns to scale
output elasticity
power production function
productivity growth
labor productivity
multifactor productivity
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5. Fungsi Produksi
• Bentuk-bentuk Fungsi produksi
• Fungsi produksi ditentukan oleh teknologi,
peralatan dan harga masukan.
• Fungsi produksi terpisah
• Fungsi produksi input tenaga kerja
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7. Returns to Scale and Returns to a
Factor
• Returns to scale : mengukur pengaruh
output akibat tambahan semua input.
• Returns to a factor : mengukur pengaruh
output terhadap tambahan satu input.
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8. Total, Marginal, and Average
Product
• Total Product
– Total product is total output.
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10. Marginal Product
– Marginal product is the change in output
caused by increasing input use.
– If MPX=∆Q/∆X> 0, total product is rising.
– If MPX=∆Q/∆X< 0, total product is falling (rare).
• Average product
– APX=Q/X.
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11. 11

12. Law of Diminishing Returns to a
Factor
• Diminishing Returns to a Factor Concept
– MPX tends to diminish as X use grows.
– If MPX grew with use of X, there would be no
limit to input usage.
– MPX< 0 implies irrational input use (rare).
• Illustration of Diminishing Returns to a
Factor
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15. Input Combination Choice
• Production Isoquants
– Technical efficiency is least-cost production.
• Input Factor Substitution
– Isoquant shape shows input substitutability.
– C-shaped isoquants are common and imply
imperfect substitutability.
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17. Marginal Rate of Technical
Substitution
– MRTSXY=-MPX/MPY
• Rational Limits of Input Substitution
– MPX<0 or MPY<0 are never observed.
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19. Marginal Revenue Product and
Optimal Employment
• Marginal Revenue Product
– MRPL is the revenue gain after all variable
costs except labor costs.
– MRPL= MPL x MRQ = ∆TR/∆L.
• Optimal Level of a Single Input
– Set MRPL=PL to get optimal employment.
• Illustration of Optimal Employment
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20. Optimal Combination of Multiple
Inputs
• Budget Lines
– Least-cost production occurs when MPX/PX = MPY/PY
and PX/PY = MPX/MPY
• Expansion Path
– Shows efficient input combinations as output grows.
• Illustration of Optimal Input Proportions
– Input proportions are optimal when no additional
output could be produce for the same cost.
– Optimal input proportions is a necessary but not
sufficient condition for profit maximization.
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22. Optimal Levels of Multiple Inputs
• Optimal Employment and Profit
Maximization
– Profits are maximized when MRPX = PX for all
inputs.
– Profit maximization requires optimal input
proportions plus an optimal level of output.
• Illustration of Optimal Levels of Multiple
Inputs
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23. Returns to Scale
• Evaluating Returns to Scale
– Returns to scale show the output effect of increasing
all inputs.
• Output Elasticity and Returns to Scale
– Output elasticity is εQ = ∆Q/Q ÷ ∆Xi/Xi where Xi is all
inputs (labor, capital, etc.)
• εQ > 1 implies increasing returns.
• εQ = 1 implies constant returns.
• εQ < 1 implies decreasing returns.
• Returns to Scale Estimation
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25. Production Function Estimation
• Cubic Production Functions
– Display variable returns to scale.
– First increasing, then decreasing returns are
common.
• Power Production Functions
– Allow marginal productivity of each input to
vary with employment of all inputs.
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26. Productivity Measurement
• How Is Productivity Measured?
– Productivity measurement is the responsibility of the
Bureau of Labor Statistics (since 1800s).
– Productivity growth is the rate of change in output per
unit of input.
– Labor productivity is the change in output per worker
hour.
• Uses and Limitations of Productivity Data
– Quality changes make productivity measurement
difficult.
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28. The Relationship Between Inputs and
Outputs
• The fundamental relationship is that between inputs
and outputs - expressed as the production function
• This can be examined at a number of levels
– the economy as a whole
– the industry
– the firm
• A number of different mathematical forms can be
used to model the relationship
– Cobb-Douglas: Q = aKaLb
– translog production function
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29. The Cobb-Douglas Example
• Q = aKaLb : Where K= capital; L = Labour
• As each individual input (K,L) is increased, output
increases, but at a decreasing rate - the principle of
diminishing returns - one of the most fundamental
economic ideas
• A production function identifies many different
techniques within the same technology
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30. The Cobb-Douglas Example
• Q = aKaLb : Where K= capital; L = Labour
• If (a+b) > 1; economies of scale
• If (a+b) < 1; diseconomies of scale
• If (a+b) = 1; constant returns to scale
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31. How to Find the Cost Minimizing Way to
Produce Each Level of Output?
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As a mathematical problem, for level of output Q*
• minimiseTC=(w)(L)+(r)(K)
• subject to Q*=aKaLb
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As a graphical approach, see the book p.167-170
As a verbal explanation
– the ratio of the wage rate to the cost of capital should be equal to the ratio of
the marginal productivity of labour to the marginal productivity of capital:
WHY?
– because otherwise $1 could be moved from spending on one input to another
and increase output without increasing cost
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32. From Production Functions to Cost Curves
• Short run - some inputs are fixed. (K). The firm is
restricted to a fixed set of plant and equipment
– capacity utilisation decisions
• Long run - both inputs are variable. (K,L). The firm can
choose the set of plant and equipment it wants
– investment decisions
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33. From Production Functions to Cost Curves
• Short run cost curves
• each short run curve shows costs for a specific set of plant and
equipment
• AFC declines
• Average variable cost rises after some point
• AC is U-shaped
• Long run cost curves
• the firm can choose from all of the known sets of plant and
equipment
• the shape of the curve depends upon economies or diseconomies of
scale
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34. Economies and diseconomies of scale
• The source of scale economies
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in manufacturing, engineering relationships
indivisibilities
specialization and division of labour
stochastic economies
• The source of diseconomies
– managerial diseconomies
– control loss
– transactional problems
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35. Empirical evidence?
• Statistical approach
– production function or cost function
• Engineering approach
• Survivor technique
• BUT THEY ALL EMBODY PROBLEMS
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36. Statistical approach
• Collect data on size and cost, or on inputs and
outputs and fit a production or cost function
– but are the observed firms on their cost curve? They may be
above it
– how can firms at high cost/inefficient sizes survive? If they
cannot where do we get the data from?
– Is the curve fitted a good fit?
• Observed firms may be X-inefficient, so a ‘data
envelope’ approach may be required
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37. The fundamental problem
• What we need to know is:
• WHAT COST WOULD BE IF FIRMS WERE
PRODUCING OUTPUT USING THE BEST SET OF
PLANT AND EQUIPMENT FOR THE PURPOSE,
USING THE CURRENT TECHNOLOGY AND AT
CURRENT FACTOR PRICES, AND IF THEY ARE 100%
EFFICIENT
• But we cannot observe that by looking at
real firms
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38. Engineering approach
• Ask consulting engineers to design
facilities of different sizes and calculate
cost
– advantage is that it does involve estimating
cost for current technology and best practice
– disadvantage is that this approach takes no
account of the MANAGERIAL factors which
might cause scale economies
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39. Survivor technique
• Divide the industry into groups of firms by
size
– e.g. small, medium, large
• Observe the market share of the different
groups over time
– if large firms gain share - scale economies
– small firms - diseconomies
– medium - U-shaped curve
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40. Can market forces be relied upon to
select out the lowest cost firms over
time?
• Firms might have different objectives,
different products, different environments,
different strategies
• But used in a recent study of the US beer
industry (Elzinga 1990)
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41. Economies of Scope and Learning
Effects
• Economies of scope
– the production of two or more products
together is more efficient than producing them
separately
• Learning Effects
– costs fall as cumulative output to date
increases
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42. Economies of scope
• May arise from the existence of resources
which can be shared by different products
• Physical facilities or perhaps ‘core
competences’ - but the latter might not be
real
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43. Multi-product Firms
• Multi-product firms complicate the idea of
scale economies
– ray economies - if costs fall as more is
produced of the same output mix
– product-specific economies - if costs fall as
output of a single product increases
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44. Learning effects
• Important in World War 2 - the same plants,
same rate of output but lower costs over time
• Most important for complex products and
processes where humans can learn
• A possible source of ‘first-mover’ advantages
- important in business strategy
• Boston Consulting Group made the
experience curve and learning effects the
centre of their approach in the 1970s
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45. Costs in the information sectors
• Products like software, CDs have unusual
cost structures
• Most costs are fixed and also SUNK
– they cannot be even partially recovered
– ‘first copy’ costs and marketing costs
• Average variable and marginal cost is
almost zero
• No natural limits to scale
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46. Implications of this cost
structure
• High sunk costs may be an entry barrier
because the cost of exit is low
• Industries where consumers respond
strongly to spending on sunk costs advertising, R&D - tend to be more
concentrated
• Competition may force price right down to
zero
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47. Other ‘cost drivers’
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Location
Timing
Company policy - what type of product
Government policy - taxes, subsidies,
health and safety
• Vertical integration
• Institutional factors - trade unions, the
legal system, corruption etc
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48. Residual Claimants
• In a market economy, firm owners are
residual claimants.
– They have the right to any revenue after
costs have been paid.
– This provides a strong incentive for
owners to keep the costs of producing
output low.
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49. Methods of Production and Shirking
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Two principal methods of production:
– Contracting
• Owner contracts with individual workers who work
independently.
– Team Production
• Workers are hired by a firm to work together under
supervision.
With team production owners must reduce the problem of shirking
– employees working at less than the normal rate of productivity.
– Example: long coffee break
– Owners will attempt to control shirking through both incentives
and monitoring.
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50. Principal-Agent Problem
• Principal-Agent Problem:
The incentive problem that arises when the
lack of information makes it difficult for the
purchaser (principal) to determine whether
the seller (agent) is acting in the principal’s
best interest.
– Firm owners face this problem when
dealing with employees.
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51. Three Types of Business Firms
• Proprietorship:
– owned by a single individual
– make up 72% of the firms in the market, but account
for only 5% of total business revenue
• Partnership:
– owned by two or more persons
– 8% of the firms; 10% of business revenues
• Corporation:
– owned by stockholders
– In contrast to the unlimited liability of proprietorships
and partnerships, the owners’ liability is limited to their
explicit investment.
– 20% of the firms; 85% of business revenue
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52. Costs, Competition, & the Corporation
• Factors that promote cost efficiency and
customer service but limit shirking by
corporate managers include:
– competition among firms for investment funds
and customers
– compensation and management incentives
– the threat of corporate takeover
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53. The Economic Role of Costs
• The demand for a product indicates the
intensity of consumers’ desires for an
item.
• Production of a good requires
resources. The opportunity cost of
these resources represents the desire
of consumers for other goods that might
have been produced instead.
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54. Explicit and Implicit Costs
• Costs may be either explicit or implicit.
Total
Cost
=
explicit costs + implicit costs
– Explicit costs result when a monetary
payment is made.
– Implicit costs involve resources owned by the firm that do
not involve a monetary payment.
• Examples:
– time spent by owner running the firm
– the foregone normal rate of return on
the owner’s financial investment (opportunity cost
of equity capital)
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55. Accounting and Economic Profit
• Economic profit is total revenues minus total costs (including
all opportunity costs).
– Economic profit occurs only when the rate of return is
above the normal market rate of return (the opportunity cost
of capital).
• Firms earning zero economic profit are earning exactly
the market (normal)
rate of return.
• Accounting profit is total revenue minus the expenses of the
firm over a time period.
– often excludes implicit costs such the opportunity cost of
equity capital
– Accounting profit is generally greater than economic
profit.
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56. Accounting versus Economic Profit
Total Revenue
Sales (groceries)
Costs (Explicit)
Groceries (wholesale)
Utilities
Taxes
Advertising
Labor (employees)
Total (explicit) costs
$170,000
$76,000
4,000
6,000
2,000
12,000
$100,000
Additional (implicit) costs
Interest (personal investment)
Rent (owner's building)
Salary (owner's labor)
Total (implicit) costs
$75,000
Total Explicit and Implicit costs:
Accounting Profit:
$70,000
$7,000
18,000
50,000
Economic Profit:
$175,000
-$5,000
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To calculate accounting profit, subtract the explicit costs from total
revenue.
• To calculate economic profit, subtract both the explicit
and implicit costs from total revenue.
• Notice how economic profits are always less than the accounting
profits (unless there are no implicit costs).
• What does it mean for economic profits to be negative
(as in this example) when accounting profits are positive?
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57. Optimal Input Procurement
Substantial specialized
investments relative to
contracting costs?
No
Yes
Spot Exchange
Complex contracting
environment relative to
costs of integration?
No
Contract
Yes
Vertical Integration
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58. The Principal-Agent Problem
• Occurs when the principal cannot observe
the effort of the agent
– Example: Shareholders (principal) cannot
observe the effort of the manager (agent)
– Example: Manager (principal) cannot observe
the effort of workers (agents)
• The Problem: Principal cannot determine
whether a bad outcome was the result of the
agent’s low effort or due to bad luck
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59. Solving the Problem Between
Owners and Managers
• Internal incentives
– Incentive contracts
– Stock options, year-end bonuses
• External incentives
– Personal reputation
– Potential for takeover
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60. Solving the Problem Between
Managers and Workers
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Profit sharing
Revenue sharing
Piece rates
Time clocks and spot checks
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