1 Chapter 9 Production and Cost in the Short Run Managers make production decisions in two different decision-making time frames:short-run production decisions and long-run production decisions . •In this chapter the short-run production decisions of the firm will be discussed.
Chapter 9 Production and Cost in the Short Run. Managers make production decisions in two different decision-making time frames:short-run production decisions and long-run production decisions . In this chapter the short-run production decisions of the firm will be discussed. Labor (L). ?. - PowerPoint PPT Presentation
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1
Chapter 9 Production and Cost in
the Short Run Managers make production decisions in two different decision-making time frames:short-run production decisions and long-run production decisions .
•In this chapter the short-run production decisions of the firm will be discussed.
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Labor (L)Capital (K)
Land (N)Entrepreneur
(E)
products
),,,( ENKLfY
??
Inputs / Factors Outputs
3
9.1some basic concepts of production theory
• productionThe creation of goods and services form inputs or resources.
• production functionA schedule (or table or mathematical equation) showing the maximum amount of output that can be produced from any specified set of inputs, given the existing technology.
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Production function relates the quantity
of all inputs to the quantity of outputs
assuming all inputs are employed
efficiently.
Production functionProduction function
Q=F(I1, I2, I3, …In)Where, Q--quantity
In --input
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technical efficiencyand economic efficiency
• technical efficiencyProduction of the maximum level of output that can be obtained from a given combination of inputs.
• economic efficiencyProduction of a given amount of output at the lowest possible cost.
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Short-run and long-run
• fixed inputAn input for which the level of usage cannot readily be changed.
• variable inputAn input for which the level of usage may be changed quite readily.
•
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• short runThat period of time in which the level of usage of one or more of the inputs is fixed.
• long runThat period of time (or planning horizon) in which all inputs are variable
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Fixed or variable proportions
• variable proportions productionProduction in which a given level of output can be produced with more than one combination of inputs.
• fixed proportions productionProduction in which one, and only one, ratio or mix of inputs can be used to produce a good.
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),( KLfTPL L
KLfAPL
),(
L
KLfMPL
),(
L
KLTP
L
KLfMP L
LL d
),(d),(lim
0
9.2Production in the short-run
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• average product of labor (AP)Total product (output) divided by the number of workers (AP = Q/L).
• marginal product of labor (MP)The additional output attributable to using one additional worker with the use of all other inputs fixed (MP = ΔQ/ Δ L)
product• If equal increments of an input are added, and the quantities of other inputs are held constant, the resulting increments of product will decrease beyond some points.
• And this means the marginal product of input will diminish.
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• law of diminishing marginal productThe principle that as the number of units of the variable input increases, other inputs held constant, a point will be reached beyond which the marginal product decreases.
• 1. A production function measures the relation between?
• A. input prices and output prices. B. input prices and the quantity of output. C. the quantity of inputs and the quantity of output. D. the quantity of inputs and input prices. E. none of the above
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• 2. A short-run production function assumes that?
• A. at least one input is fixed in supply. B. the level of output is fixed. C. all inputs are fixed in supply. D. both a and b E. both b and c
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• 3. If average product is decreasing, then marginal product?
• A. must be greater than average product. B. must be less than average product. C. must be increasing. D. cannot be decreasing. E. both a and c
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• 4. Which of the following statements is TRUE?
• A. A firm plans in the short run and operates in the long run. B. In the long run a firm can change all but one input. C. In the long run all inputs are variable. D. In the short run all inputs are fixed.
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• 5. Suppose you operate a sandwich shop and currently have two employees. If you hire a third employee, your output of sandwiches per day rises from 75 to 90. If you hire a fourth employee, output rises to 110 per day. A fifth and sixth employee would cause output to rise to 120 and 125 per day, respectively. Choose the correct statement:
• A. Diminishing returns set have not yet set in because output is still increases. B. Diminishing returns set in with the hiring of the fourth worker. C. Diminishing returns set in with the hiring of the fifth worker. D. Diminishing returns set in with the hiring of the sixth worker.
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• 6. The marginal product of labor? • A. is less than the average product of labor when the
average product of labor is decreasing. B. measures how output changes as the wage rate changes. C. is negative when adding another unit of labor decreases output. D. both a and c E. both b and c
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• 7. Diminishing marginal productivity? • A. occurs when the marginal product curve begins to
slope downward. B. occurs eventually because each additional unit of the variable unit has, on average, fewer units of the fixed input with which to work. C. occurs when adding one more unit of the variable input reduces total product. D. both a and b E. both a and c
•
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• 8. If marginal product is increasing, then it must be the case that?
• A. average product is increasing. B. average product is less than marginal product. C. average product is greater than marginal product. D. both a and c E. both a and b.
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• 9. If a firm is producing a given level of output in a technically-efficient manner, then it must be the case that?
• A. it is choosing the lowest-cost method of producing that output. B. this output level is the most that can be produced with the given levels of inputs. C. each input is producing its maximum marginal product. D. both a and b E. both a and c
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• 10. If a firm is producing a given level of output in an economically-efficient manner, then it must be the case that?
• A. it is choosing the lowest-cost method of producing that output. B. this output level is the most that can be produced with the given level of inputs. C. each input is producing its maximum marginal product. D. both a and b E. both a and c
•
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9.4 The nature of economic costs
In this chapter you will have a brief review of Cost theory which will be found useful for further analysis.
• But we will go over some concepts.
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Some useful conceptsSome useful concepts
√ Opportunity cost
√ Implicit & Explicit cost
√ Fixed and variable costs
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Opportunity cost
The opportunity cost of producing a
product refers to the highest possible
revenue from the same inputs if they were
used elsewhere. • Why there is opportunity cost?
• Since resources could be used elsewhere, and to choose one opportunity is to sacrifice another.
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例:上大学的机会成本
个人耗费的经济资源:四年时间、四万元钱
如果用同样这些经济资源去:
A :炒股票,收入 20 万元;
B :开餐馆,收入 15 万元;
C :经商,收入 13 万元。
则上大学的机会成本是 20 万元。
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• 试述机会成本在厂商投资决策中的作用及把握。(复旦大学 98 研)
• 判断:某方案的机会成本是指决策者为采取改方案而放弃的任何其他方案的利益。
• 试述机会成本与会计成本,经济利润与正常利润的区别和联系。(中国海洋大学 2002研)
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Implicit & Explicit cost
• Implicit cost refers to the cost of the resources owned and used by the firm’s owner.
• Explicit cost refers to the ordinary items that accountants include as the firm’s expenses.
• Firm’s cost should include both Implicit & Explicit cost.
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例:
你大学毕业后,你可以:到 A 企业工作,收入 3 万元;到 B 企业工作,收入 5 万元;到C 企业工作,收入 6 万元。
烟台的 D 企业也需求你, D 企业应该给你多少支付你才会去工作(受雇用)呢?显然是6 万元。
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• 案例分析
张三的收益、成本和利润
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• 会计师与经济学家的收益、成本、利润核算表(单位:元)
会计师的算法 经济学家的算法项目 数量 项目 数量
销售收益 300000 销售收益 300000
成本 成本缝纫机批发成本 150000 缝纫机批发成本 150000
其他服务 20000 其他服务 20000
工资 50000 工资 50000
张三本人的工资 45000
固定资产折旧 22000 资产市场价值的减少 10000
银行利息 12000 银行利息 12000
张三的资金的利息 11500
总成本 254000 总成本 293500
会计利润 46000 经济利润 6000
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ILLUSTRATION 9.2
• Suppose Alpha &Beta P330
• Implicit Costs and Household Decision Making P333
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9.5Short run total costs9.5Short run total costs
In the short run at least one input is fixed
),( KLfQ
So we have STC
KrQLwQSTC )()(
SVC SFC
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由由 TPTP 曲线导出曲线导出 SVCSVC 曲线曲线
SVC ( w · L )w ·· L
Q — LQ — L 关系Q — LQ — L 关系
ww · · L — QL — Q 关系
ww · · L — QL — Q 关系
Q
O
TPL
L
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KrQLwQSTC )()(
可变成本可变成本
不变成本不变成本
Kr
STC(Q)STC(Q)
ww··L(Q)L(Q)
QQ
CC
OO
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Classification of short- run cost
• TFC, TVC, and TC
• AFC, AVC, and AC
• MC
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• total fixed cost (TFC)The total amount paid for fixed inputs. Total fixed cost does not vary with output.
• total variable cost (TVC)The amount paid for variable inputs. Total variable cost increases with increases in output
bKrTFC
)()()( QQLwQTVCTVC
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• total cost (TC)The sum of total fixed cost and total variable cost. Total cost increases with increases in output (TC = TFC + TVC)
• average fixed cost (AFC)Total fixed cost divided by output (AFC= TFC/Q).
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Total cost
QQ
CC
TVCTVC
TCTC
TFCTFC
OO
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• average variable cost (AVC)Total variable cost divided by output (AVC = TVC/Q).
• average total cost (ATC)Total cost divided by output or the sum of average fixed cost plus average variable cost (ATC = TC/Q = AFC + AVC).
• short-run marginal cost (SMC)The change in either total variable cost or total cost per unit change in output (Δ TVC/ Δ Q = Δ TC/ Δ Q).
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Average fixed cost
QQ
TVCTVC
TCTC
TFCTFC
OO
QQ
CC
OO
AFCAFC
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Average variable cost
QQ
CC
TVCTVC
TCTC
TFCTFC
QQ
AVCAVCCC
OO
OO
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TCTC
TVCTVC
TFCTFC
CC
QQOO
CC
OO QQ
ACAC
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• 简述 TC 曲线上过原点直线切点的意义(复旦大学 2001 研)
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TCTC
TVCTVC
TFCTFC
CC
QQ
CC
OO QQ
MCMCOO
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• 什么是平均成本?什么是边际成本?为什么当二者相等时平均成本达到最小值?(武大2002 研)
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• 请分析为什么平均成本的最低点一定在平均可变成本最低点的右边?
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• A typical set of short-run cost curves is characterized by the following features:
• (1) AFC decreases continuously as output increases, • (2) AVC is U-shaped, • (3) ATC is U-shaped, • (4) SMC is U-shaped and crosses both AVC and ATC
at their minimum points, and • (5) SMC lies below (above) both AVC and ATC over
the output range for which these curves fall (rise).
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• 判断下列说法是否正确:• 平均不变成本决不随产量的增加而提高• 边际成本先于平均成本而上升
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9.6Relations between short-run costs and production
Q
Lw
Q
TFC
Q
QTVC
Q
QTCQMC
d
d
d
d
d
)(d
d
)(d)(
LMPwQMC
1)(
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LAPw
Q
Lw
Q
TVCAVC
1
)()( QLwQTVC
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LAP
LMP
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• The link between product curves and cost curves in the short run when one input is variable is reflected in the following relations:
• SMC = w/MP and AVC = w/AP• When MP (AP) is increasing, SMC (AVC) is
decreasing. When MP (AP) is decreasing, SMC (AVC) is increasing. When MP equals AP at AP’ maximum value, SMC equals AVC at AVC’minimum value. Similar but not identical relations hold when more than one input is variable.
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• 8. 已知某厂商的生产函数为 Q=40A0.25 B0.75 , A 、 B 两种生产要素的价格 PA=4 , PB=3 ,求:
• A. the level of output is fixed. B. all inputs are fixed in supply. C. at least one input is fixed in supply. D. both a and c E. none of the above
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• 12. Which of the following is an example of an implicit cost?
• A. Foregone rent on property owned by the firm. B. The value of time worked by the owner. C. Wages and salaries paid to employees. D. both a and b E. all of the above
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• 13. Average fixed cost? • A. increases if marginal cost is increasing.
B. increases as output increases. C. decreases as output increases. D. increases if marginal cost is greater than average fixed cost.
•
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• 14. Marginal cost? • A. is less than average cost when average cost is
decreasing. B. measures how total cost changes when one more unit of output is produced. C. measures how total cost changes when input prices change. D. both a and b E. both b and c
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• 15. The next 6 questions refer to the following:
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• At what output does the firm reach minimum average variable cost?
• A. 80 B. 100 C. 600 D. 6,000 E. 8,000
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• 16. What is AVC at its minimum?
• A. $15 B. $25 C. $40 D. $80 E. $100
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• 17. When the firm uses 60 units of labor, how much output does it produce?
• A. 60 units B. 360 units C. 3,600 units D. 5,400 units E. none of the above
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• 18. When the firm uses 60 units of labor, what is AVC at this level of output?
• A. $22.22 B. $33.33 C. $60 D. $120 E. $2,000
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• 19. When the firm uses 60 units of labor, what is marginal cost at this level of output?
• A. $22.22 B. $33.33 C. $90 D. $180 E. $2000
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• 20. When the firm uses 60 units of labor, what is average total cost at this output?
• A. $44.44 B. $60 C. $66.66 D. $120 E. none of the above