Chapter 5 - Production. We open this chapter by examining the production function, a quantitative summary of the firm’s production possibilities. Next, we look closely at production in the short run and examine the impact on output of changing a single input. Then we consider production in the long run, when the firm has the flexibility to vary the amounts of all inputs.
Managerial Economics, 8e William F. Samuelson ● Stephen G. Marks Chapter Five Production Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Onetenth of the participants produce over onethird of the output. Increasing the number of participants merely reduces the average output ~Norman Augustine, Augustine’s Laws Copyright © 2015 John Wiley & Sons, Inc. All rights reserved For Discussion Allocating a Sales Force To a greater or lesser extent, almost all firms face the task of finding and retaining customers for their goods Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Basic Production Concepts Production Technology A Production Function for Auto Parts Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Production with one variable Input ShortRun and LongRun Production Marginal Product The Law of Diminishing Marginal Returns Optimal Use of an Input Example 1 Example 2 Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 5.1 Total Product and Marginal Product Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Production in the Long Run Returns to Scale LeastCost Production Example 3 Winning in Football and Baseball A Graphical Approach Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 5.2 Isoquants and Isocost Lines Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 5.3 Producing Output at Minimum Cost Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Measuring Production Functions Linear Production Production with Fixed Proportions Polynomial Functions The CobbDouglas Function Estimating Production Functions Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Other Production Decisions Multiple Plants Multiple Products Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 5.4 Splitting Production between Two Plants Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Applications Aluminum vs. Steel in Cars and Trucks Allocating a Sales Force—Revisited Copyright © 2015 John Wiley & Sons, Inc. All rights reserved Figure 5.5 Profit Functions for an office supply firm Copyright © 2015 John Wiley & Sons, Inc. All rights reserved ... A Graphical Approach Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved Figure 5. 2 Isoquants and Isocost Lines Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved Figure 5. 3 Producing Output ... Optimal Use of an Input Example 1 Example 2 Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved Figure 5. 1 Total Product and Marginal Product Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved... Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved Other Production Decisions Multiple Plants Multiple Products Copyright © 20 15 John Wiley & Sons, Inc. All rights reserved Figure 5. 4 Splitting Production