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eFarmer.us Production Function - Hay
Copyright 2009 eStudy.us [email protected]
Production Functionshows the relationship between the level of inputs used to produce output
― Labor to cars― Water to hay― Grass to beef
at least one fixed inputthe production function is a short run concept
eFarmer.us Production Function - HayTractor and WagonImplies Maximum Output per Worker
Copyright 2009 eStudy.us [email protected]
LaborHay per Hour
0
1
2
3
4
5
6
7
0
10
25
50
65
75
80
80
10
15
25
15
10
5
0
$8/10=
$8/15=
$8/25=
$8/15=
$8/10=
$8/5=
Wage = $8
0.80
0.53
0.32
0.53
0.80
1.60
- A fixed resource- Production efficiency
𝑀𝐶=𝑊𝑎𝑔𝑒𝑀𝑃
Marginal Product (MP): output produced by using one more variable input
Diminishing Marginal Product MP increasing at a decreasing rate
𝑀𝑃=∆𝑄∆ 𝐿
eFarmer.us Production Function - Hay
Copyright 2009 eStudy.us [email protected]
Diminishing Marginal Product
Using the Hay example
0.32
Minimum Marginal Cost corresponds to maximum Marginal Product
50
0.80
10MP
1 2 3 4 5 6
25
Hay
Workers
MC
10 25 50 65 75 80 Hay
$
TP
1 2 3 4 5 6 Workers
Hay
eFarmer.us Cost Curves - Hay
Copyright 2009 eStudy.us [email protected]
Labor Hay MP Wage TFC TVC TC AFC AVC ATC MC
0 0 $8 $5 $0 $5 $0.00
1 10 10 $8 $5 $8 $13 $0.50 $0.80 $1.30 $0.80
2 25 15 $8 $5 $16 $21 $0.20 $0.64 $0.84 $0.53
3 50 25 $8 $5 $24 $29 $0.10 $0.48 $0.58 $0.32
4 65 15 $8 $5 $32 $37 $0.08 $0.49 $0.57 $0.53
5 75 10 $8 $5 $40 $45 $0.07 $0.53 $0.60 $0.80
6 80 5 $8 $5 $48 $53 $0.06 $0.60 $0.66 $1.60
0 10 20 30 40 50 60 70 80 90$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
MC
AVC
ATC
𝑀𝑃=∆𝑄∆ 𝐿
𝑀𝐶=∆𝑇𝐶∆𝑄
eFarmer.us Production and Cost - Hay
Copyright 2009 eStudy.us [email protected]
Labor Hay MP Wage MC
0 0 $8
1 10 10 $8 $0.80
2 25 15 $8 $0.53
3 50 25 $8 $0.32
4 65 15 $8 $0.53
5 75 10 $8 $0.80
6 80 5 $8 $1.60
0 10 20 30 40 50 60 70 80 90$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80
MC
AVC
ATC
0 1 2 3 4 5 60
5
10
15
20
25
30
Minimum MC is consistent with Maximum MP
MP
