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Chapter 4 The Theory of Production
Production ,[object Object],[object Object],[object Object],[object Object]
Elements in the Process of Production ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Short Run Production Function ,[object Object],[object Object]
Important Concepts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Total Product, Marginal Product and Average Product of Labor TP labour MP (∆TP/ ∆L) AP(TP/L) 0 0 - 0 8 1 8 8 20 2 12 10 33 3 13 11 44 4 11 11 50 5 6 10 54 6 4 9 56 7 2 8 56 8 0 7 54 9 -2 6 50 10 -4 5
Relationship between TP L , AP L  and MP L Land Labor TP L AP L MP L Law of Marg. Returns Stages of Production 1 1 3 3 - Increasing Marg. Returns Stage 1 1 2 7 3.5 4 1 3 33 11 26 1 4 50 12.5 17 Diminishing Marg. Returns Stage 2 1 5 65 13 15 1 6 75 12.5 10 1 7 80 11.43 5 1 8 80 10 0 1 9 78 8.67 -2 Negative Marg. Returns Stage 3 1 10 72 7.2 -6
Production Labor TP L  maximum TP L AP L MP L MP L  = 0 AP L  maximum MP L  maximum 0 Stage 1 Stage 2 Stage 3 3 Stages of Production Curve in Short Run
Stages of Production ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
Law of Diminishing Marginal Returns ,[object Object],[object Object]
Production Labor TP L  maximum TP L AP L MP L MP L  = 0 AP L  maximum (APL = MPL) MP L  maximum 0 Stage 1 Stage 2 Stage 3 Law of Diminishing Marginal Returns (a) (b) ,[object Object],[object Object],[object Object],[object Object],[object Object]
Production Labor TP L  maximum TP L AP L MP L MP L  = 0 AP L  maximum (APL = MPL) MP L  maximum 0 Stage 1 Stage 2 Stage 3 Law of Diminishing Marginal Returns (a) (b) ,[object Object],[object Object],[object Object],[object Object],[object Object]
Long Run Production Function ,[object Object],[object Object],[object Object],[object Object],[object Object]
Economies of Scale ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Diseconomies of Scale ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Producers’ objective and responsibility ,[object Object],[object Object],[object Object],[object Object],[object Object]

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Chapter 4 Production

  • 1. Chapter 4 The Theory of Production
  • 2.
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8. Total Product, Marginal Product and Average Product of Labor TP labour MP (∆TP/ ∆L) AP(TP/L) 0 0 - 0 8 1 8 8 20 2 12 10 33 3 13 11 44 4 11 11 50 5 6 10 54 6 4 9 56 7 2 8 56 8 0 7 54 9 -2 6 50 10 -4 5
  • 9. Relationship between TP L , AP L and MP L Land Labor TP L AP L MP L Law of Marg. Returns Stages of Production 1 1 3 3 - Increasing Marg. Returns Stage 1 1 2 7 3.5 4 1 3 33 11 26 1 4 50 12.5 17 Diminishing Marg. Returns Stage 2 1 5 65 13 15 1 6 75 12.5 10 1 7 80 11.43 5 1 8 80 10 0 1 9 78 8.67 -2 Negative Marg. Returns Stage 3 1 10 72 7.2 -6
  • 10. Production Labor TP L maximum TP L AP L MP L MP L = 0 AP L maximum MP L maximum 0 Stage 1 Stage 2 Stage 3 3 Stages of Production Curve in Short Run
  • 11.
  • 12.
  • 13.
  • 14.
  • 15.
  • 16.
  • 17.
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23.
  • 24.