微观经济学英文课件：chapter-6 Production

1、Chapter 6Production1Chapter 1Topics to be DiscussedThe Technology of ProductionIsoquantsProduction with One Variable Input (Labor)Production with Two Variable InputsReturns to Scale2Chapter 1IntroductionOur focus is the supply side.The theory of the firm will address:How a firm makes cost-minimizing

2、 production decisionsHow cost varies with outputCharacteristics of market supplyIssues of business regulation3Chapter 1The Technology of ProductionThe Production ProcessCombining inputs or factors of production to achieve an outputCategories of Inputs (factors of production)LaborMaterialsCapital4Cha

3、pter 1The Technology of ProductionProduction Function:Indicates the highest output that a firm can produce for every specified combination of inputs given the state of technology.Shows what is technically feasible when the firm operates efficiently.5Chapter 1The Technology of ProductionThe productio

4、n function for two inputs:Q = F(K,L) Q = Output, K = Capital, L = LaborFor a given technology6Chapter 1IsoquantsAssumptionsFood producer has two inputsLabor (L) & Capital (K)7Chapter 1IsoquantsObservations:1) For any level of K, output increases with more L.2)For any level of L, output increases wit

5、h more K.3)Various combinations of inputs produce the same output.8Chapter 1IsoquantsIsoquantsCurves showing all possible combinations of inputs that yield the same output9Chapter 1Production Function for Food120405565752406075859035575901001054658510011011557590105115120Capital Input12345Labor Inpu

6、t10Chapter 1Production with Two Variable Inputs (L,K)Labor per year1234123455Q1 = 55The isoquants are derivedfrom the productionfunction for output ofof 55, 75, and 90.ADBQ2 = 75Q3 = 90CECapitalper yearThe Isoquant Map11Chapter 1IsoquantsThe isoquants emphasize how different input combinations can b

7、e used to produce the same output.This information allows the producer to respond efficiently to changes in the markets for inputs.Input Flexibility12Chapter 1IsoquantsShort-run:Period of time in which quantities of one or more production factors cannot be changed.These inputs are called fixed input

8、s.The Short Run versus the Long Run13Chapter 1IsoquantsLong-runAmount of time needed to make all production inputs variable.The Short Run versus the Long Run14Chapter 1AmountAmountTotalAverage Marginalof Labor (L)of Capital (K)Output (Q)ProductProductProduction withOne Variable Input (Labor)0100-110

9、101010210301520310602030410802020510951915610108181371011216481011214091010812-4101010010-815Chapter 1Observations:1) With additional workers, output (Q) increases, reaches a maximum, and then decreases.Production withOne Variable Input (Labor)16Chapter 1Observations:2) The average product of labor

10、(AP), or output per worker, increases and thendecreases.Production withOne Variable Input (Labor)17Chapter 1Observations:3) The marginal product of labor (MP), or output of the additional worker, increases rapidly initially and then decreases and becomes negative.Production withOne Variable Input (L

11、abor)18Chapter 1Total ProductA: slope of tangent = MP (20)B: slope of OB = AP (20)C: slope of OC= MP & APLabor per MonthOutputper Month60112023456789101ABCDProduction withOne Variable Input (Labor)19Chapter 1Average ProductProduction withOne Variable Input (Labor)81020Outputper Month02345679101Labor

12、 per Month30EMarginal ProductObservations:Left of E: MP AP & AP is increasingRight of E: MP AP, AP is increasingWhen MP AP, AP is decreasingWhen MP = AP, AP is at its maximumProduction withOne Variable Input (Labor)21Chapter 1Production withOne Variable Input (Labor)Laborper MonthOutputper Month6011

13、2023456789101ABCD81020E0234567910130Outputper MonthLaborper MonthAP = slope of line from origin to a point on TP, lines b, & c.MP = slope of a tangent to any point on the TP line, lines a & c.22Chapter 1As the use of an input increases in equal increments, a point will be reached at which the result

14、ing additions to output decreases (i.e. MP declines).Production withOne Variable Input (Labor)The Law of Diminishing Marginal Returns23Chapter 1When the labor input is small, MP increases due to specialization.When the labor input is large, MP decreases due to inefficiencies.The Law of Diminishing M

15、arginal ReturnsProduction withOne Variable Input (Labor)24Chapter 1Can be used for long-run decisions to evaluate the trade-offs of different plant configurationsAssumes the quality of the variable input is constantThe Law of Diminishing Marginal ReturnsProduction withOne Variable Input (Labor)25Cha

16、pter 1Explains a declining MP, not necessarily a negative oneAssumes a constant technologyThe Law of Diminishing Marginal ReturnsProduction withOne Variable Input (Labor)26Chapter 1The Effect ofTechnological ImprovementLabor pertime periodOutputper timeperiod50100023456789101AO1CO3O2BLabor productiv

17、itycan increase if there are improvements intechnology, even thoughany given productionprocess exhibitsdiminishing returns tolabor.27Chapter 1Malthus predicted mass hunger and starvation as diminishing returns limited agricultural output and the population continued to grow.Why did Malthus predictio

18、n fail?Malthus and the Food Crisis28Chapter 1Index of World FoodConsumption Per Capita1948-1952100196011519701231980128199013719951351998140Year Index29Chapter 1Malthus and the Food CrisisThe data show that production increases have exceeded population growth.Malthus did not take into consideration

19、the potential impact of technology which has allowed the supply of food to grow faster than demand.30Chapter 1Malthus and the Food CrisisTechnology has created surpluses and driven the price down.QuestionIf food surpluses exist, why is there hunger?31Chapter 1Malthus and the Food CrisisAnswerThe cos

20、t of distributing food from productive regions to unproductive regions and the low income levels of the non-productive regions.32Chapter 1Labor Productivity Production withOne Variable Input (Labor)33Chapter 1Labor Productivity and the Standard of LivingConsumption can increase only if productivity

21、increases.Determinants of ProductivityStock of capitalTechnological changeProduction withOne Variable Input (Labor)34Chapter 1Labor Productivity inDeveloped Countries1960-19734.754.048.302.892.361974-19862.101.852.501.690.711987-19971.482.001.941.021.09UnitedUnitedFranceGermanyJapanKingdomStatesAnnu

22、al Rate of Growth of Labor Productivity (%)$54,507$55,644$46,048$42,630$60,915Output per Employed Person (1997)35Chapter 1Trends in Productivity1) U.S. productivity is growing at a slower rate than other countries.2)Productivity growth in developed countries has been decreasing.Production withOne Va

23、riable Input (Labor)36Chapter 1Explanations for Productivity Growth Slowdown1)Growth in the stock of capital is the primary determinant of the growth in productivity.Production withOne Variable Input (Labor)37Chapter 1Explanations for Productivity Growth Slowdown2)Rate of capital accumulation in the

24、 U.S. was slower than other developed countries because the others were rebuilding after WWII.Production withOne Variable Input (Labor)38Chapter 1Explanations for Productivity Growth Slowdown3)Depletion of natural resources4) Environment regulationsProduction withOne Variable Input (Labor)39Chapter

25、1ObservationU.S. productivity has increased in recent yearsWhat Do You Think?Is it a short-term aberration or a new long-run trend?Production withOne Variable Input (Labor)40Chapter 1Production withTwo Variable InputsThere is a relationship between production and productivity.Long-run production K&

26、L are variable.Isoquants analyze and compare the different combinations of K & L and output41Chapter 1The Shape of IsoquantsLabor per year1234123455In the long run both labor and capital arevariable and bothexperience diminishingreturns.Q1 = 55Q2 = 75Q3 = 90Capitalper yearADBCE42Chapter 1Reading the

27、 Isoquant Model1)Assume capital is 3 and labor increases from 0 to 1 to 2 to 3. Notice output increases at a decreasing rate (55, 20, 15) illustrating diminishing returns from labor in the short-run and long-run.Production withTwo Variable InputsDiminishing Marginal Rate of Substitution43Chapter 1Re

28、ading the Isoquant Model2)Assume labor is 3 and capital increases from 0 to 1 to 2 to 3.Output also increases at a decreasing rate (55, 20, 15) due to diminishing returns from capital.Diminishing Marginal Rate of SubstitutionProduction withTwo Variable Inputs44Chapter 1Substituting Among InputsManag

29、ers want to determine what combination if inputs to use. They must deal with the trade-off between inputs.Production withTwo Variable Inputs45Chapter 1Substituting Among InputsThe slope of each isoquant gives the trade-off between two inputs while keeping output constant.Production withTwo Variable

30、Inputs46Chapter 1Substituting Among InputsThe marginal rate of technical substitution equals:Production withTwo Variable Inputs47Chapter 1Marginal Rate ofTechnical SubstitutionLabor per month1234123455Capital per yearIsoquants are downwardsloping and convexlike indifferencecurves.1111212/31/3Q1 =55Q

31、2 =75Q3 =9048Chapter 1Observations:1)Increasing labor in one unit increments from 1 to 5 results in a decreasing MRTS from 1 to 1/2.2) Diminishing MRTS occurs because of diminishing returns and implies isoquants are convex.Production withTwo Variable Inputs49Chapter 1Observations:3)MRTS and Marginal

32、 ProductivityThe change in output from a change in labor equals:Production withTwo Variable Inputs50Chapter 1Observations:3)MRTS and Marginal ProductivityThe change in output from a change in capital equals:Production withTwo Variable Inputs51Chapter 1Observations:3)MRTS and Marginal ProductivityIf

33、output is constant and labor is increased, then:Production withTwo Variable Inputs52Chapter 1Isoquants When Inputs are Perfectly SubstitutableLaborper monthCapitalper monthQ1Q2Q3ABC53Chapter 1Observations when inputs are perfectly substitutable:1)The MRTS is constant at all points on the isoquant.Pr

34、oduction withTwo Variable InputsPerfect Substitutes54Chapter 1Observations when inputs are perfectly substitutable:2) For a given output, any combination of inputs can be chosen (A, B, or C) to generate the same level of output (e.g. toll booths & musical instruments)Production withTwo Variable Inpu

35、tsPerfect Substitutes55Chapter 1Fixed-ProportionsProduction FunctionLabor per monthCapitalpermonthL1K1Q1Q2Q3ABC56Chapter 1Observations when inputs must be in a fixed-proportion:1)No substitution is possible.Each output requires a specific amount of each input (e.g. labor and jackhammers).Fixed-Propo

36、rtions Production FunctionProduction withTwo Variable Inputs57Chapter 1Observations when inputs must be in a fixed-proportion:2) To increase output requires more labor and capital (i.e. moving from A to B to C which is technically efficient).Fixed-Proportions Production FunctionProduction withTwo Va

37、riable Inputs58Chapter 1A Production Function for WheatFarmers must choose between a capital intensive or labor intensive technique of production.59Chapter 1Isoquant Describing theProduction of WheatLabor(hours per year)Capital(machinehour peryear)2505007601000408012010090Output = 13,800 bushels per

38、 yearABPoint A is more capital-intensive, andB is more labor-intensive.60Chapter 1Observations:1)Operating at A: L = 500 hours and K = 100 machine hours.Isoquant Describing theProduction of Wheat61Chapter 1Observations:2)Operating at BIncrease L to 760 and decrease K to 90 the MRTS 1:Isoquant Descri

39、bing theProduction of Wheat62Chapter 1Observations:3)MRTS 1, therefore the cost of labor must be less than capital in order for the farmer substitute labor for capital.4)If labor is expensive, the farmer would use more capital (e.g. U.S.).Isoquant Describing theProduction of Wheat63Chapter 1Observat

40、ions:5) If labor is inexpensive, the farmer would use more labor (e.g. India).Isoquant Describing theProduction of Wheat64Chapter 1Returns to ScaleMeasuring the relationship between the scale (size) of a firm and output1)Increasing returns to scale: output more than doubles when all inputs are doubl

41、edLarger output associated with lower cost (autos)One firm is more efficient than many (utilities)The isoquants get closer together65Chapter 1Returns to ScaleLabor (hours)Capital(machinehours)102030Increasing Returns:The isoquants move closer together510240A66Chapter 1Returns to ScaleMeasuring the r

42、elationship between the scale (size) of a firm and output2)Constant returns to scale: output doubles when all inputs are doubledSize does not affect productivityMay have a large number of producersIsoquants are equidistant apart67Chapter 1Returns to ScaleLabor (hours)Capital(machinehours)Constant Re

43、turns:Isoquants are equally spaced 10203015510240A668Chapter 1Returns to ScaleMeasuring the relationship between the scale (size) of a firm and output3)Decreasing returns to scale: output less than doubles when all inputs are doubledDecreasing efficiency with large sizeReduction of entrepreneurial a

44、bilitiesIsoquants become farther apart69Chapter 1Returns to ScaleLabor (hours)Capital(machinehours)Decreasing Returns:Isoquants get further apart102030510240A70Chapter 1Returns to Scalein the Carpet IndustryThe carpet industry has grown from a small industry to a large industry with some very large

45、firms.71Chapter 1Returns to Scalein the Carpet IndustryQuestionCan the growth be explained by the presence of economies to scale?72Chapter 1Carpet Shipments, 1996(Millions of Dollars per Year)The U.S. Carpet Industry1. Shaw Industries$3,2026. World Carpets$4752. Mohawk Industries1,7957. Burlington Industries4503. Beaulieu of America1,0068. Collins & Aikman4184. Interface Flooring8209. Masland Industries38