12 Production and Cost

• We had worked our way through efficiency from economic to technical.

• Discuss some of the options in the long run instead of the problems of using cost in the short run.
• They can analyze in the real world.

• The technology available and plant size are not given.

• Firms look at the costs of the inputs and the tech to make their long-run deci sions.

• You are opening a hamburger stand.
• The type of stove you buy will be one of the decisions you have to make.
• You can find many different types.
• Some use more gas than others but cost less to buy, some are electric, some are little, and some use microwaves.
• Some have long-term guarantees.
• Each brochure is colorful and tells you how great it is.
• After studying the various specifications and aspects of the production technology, you choose the stove that has the combination of characteristics that you believe best fits your needs.

• You have to decide on workers.
• Do you want bilingual workers, college-educated workers, part-time workers or experienced workers?
• Simple production decisions involve complicated questions.
• The decisions are made based on the expected costs and usefulness of inputs.

• Firms are interested in the lowest cost, or most economically efficient, methods of production when choosing among existing technologies.
• They compare their costs and consider all technically efficient methods.
• One production process uses 10 workers and 1 acre and another uses 1 worker and 100 acres, which are the lowest number of inputs you can use with those production processes.
• Both involve less of both inputs so they are efficient.
• That doesn't mean that the production processes are the same.
• The question can't be answered if you don't know the costs of the inputs.

• If land rents for $10 an acre and each worker costs $10, our answer likely will be different than if land rents for $100 and each worker costs $100.
• The pro duction process uses lots of workers and less land if you have land at $100 an acre.

• Firms will look at all available production tech nologies and choose the technology that is economically efficient in the long run.
• The prices of various factors of production will be reflected in these choices.
• The prices reflect the factors' relative scarcities.

• Consider the use of land in the United States and Japan.
• The price of land in the United States is lower than in Japan because of the large amount of land.
• An acre of rural land in the United States could cost $3,000, but in Japan it could cost $25,000.
• The United States and Bangladesh use different things.
• Labor is more plentiful in Bangladesh than in the United States, so production techniques there use more workers per unit of land than they do in the US.

• The economically efficient method of production in both countries is different because of the different costs of inputs.

• The technically effi cient method of production has the lowest cost and is the economically efficient method of production.

• The law of diminishing marginal productivity accounted for the shape of the average cost curve in the last chapter.
• The firm was adding more of a vari able input.

• The computer and technology are constantly changing, so hit the Print button.
• The cost structure of production is out.
• 3D printing, also part, the same way that printed paper comes out when called Additive Manufacturing, in which you print using a laser printer, except in a three-dimensional part is created three dimensions.
• Once you have your part specifications, the second shape, you can combine liquid or powder.
• The economies of scale are reduced if you print this unit than if you print the first one.
• The cost structure has shifted enormous work, cutting down the raw from one with large fixed costs to one material into the part you want.
• Injec has lower fixed costs.
• So, even if it's work-intensive.

• The production of such parts can be higher than the variable costs of more automated using templates and molds, but with both of traditional methods of manufacturing, for many parts that those manufacturing processes, the fixed setup costs are you need on demand, or that you need only a relatively high.
• When a small number of 3D printing can help you produce a large quantity, it makes sense to automate the process.
• If you don't need a lot of costs.
• Many of the parts that make up airplanes are produced by hand at a high cost.

• You can make things using 3D printing.

• The shape of the long-run cost curve is the most important deter due to the existence of economies and scale.
• Let's see what effect these will have on diseconomies of scale.

• Producing 200,000 high-definition TVs costs between 40,000 and 200,000 units and costs the firm between 40 and 200 million dollars.
• There are increasing returns to scale.

• economies of scale are important because many production techniques need a certain amount of output to be useful.
• Say you want to make a pound of steel.
• You can't just build a mini blast furnace and get a pound of steel.
• The production capacity of the smallest blast furnace is measured in tons per hour.

• The costs per unit of output decrease as output increases.
• Consider this book as an example.

• In the long run, average costs fall because of economies of scale, then they are constant for a while, and then they tend to rise due to diseconomies of scale.

• The lower the cost per book, the more copies of the book are produced.
• It costs more to produce a textbook for an upper-level course than it does for a lower-level course.
• Smaller printing costs are often cheaper per unit than larger production runs work, so why do both need to be written, edited, and composited?

• The setup costs are visible.
• The costs of production are reflected in the prices of pro duced goods.
• If you move to upper-level academic courses where print runs are smaller, you'll discover that the books are less colorful but are priced the same as this introductory text.

• The expected number of copies to be sold was an important factor in the planning of the book's cost.
• The expected cost per unit was affected by the number of books produced.
• Whenever there are economies of scale, this will be the case.
• The cost per unit of a small production run is higher than the cost per unit of a large production run.

• Figure 12-1(a) shows a long-run production table and Figure 12-1(b) shows the typical shape of a long-run average cost curve.

• The cost per unit of output is going down.

• They mean by minimum efficient level of production that it's not economical to have production runs of less than a certain size because setup costs are so high.

• The Reinsch's farm is more complicated than that.

• The company that sewed the shirt 500,000 pounds of cotton was in China.
• West Texas, USA, at a farm like the States almost exclusively handpick their farm that is highlighted in cotton.
• U.S. farmers have Rivoli's book.

• Other countries are responding.

• You aren't expected to know that cotton producers in the U.S. continue to lose their com, but economies of scale are what they do.

• The market is large enough for firms to take advantage of economies of scale.
• In a perfectly competitive market, the minimum efficient level of production is where the average total costs are lowest.

• The average cost is increasing.

• Adding units of a variable input to a fixed input increases the cost of producing high-definition TVs.
• There are diseconomies of scale associated with choosing to produce productivity that occur when there are 400,000 rather than 200,000.
• There are decreasing returns to scale.

• As firms get large,economies of scale start to occur.
• Dis economies of scale are not caused by diminishing marginal productivity.

• If only nical relationships were involved.
• The same technical process could be used over technical relationships and had no and over again at the same per-unit cost.

• Monitoring costs increase as the firm's size increases.

• As the firm's size increases, so does team spirit.

• Holacracy, Diseconomies of Scale, and Zappos Companies are looking for a new company.
• There are hundreds of management fads that claim to avoid diseconomies of scale, but leaders at Zappos argue that the holacracy structure is far more efficient.
• Many observers have doubts.

• One company that has recently adopted this structure is the firms, since they are always looking for ways to improve efficiency.

• Monitoring costs are zero if you're producing something yourself.
• As production increases, you have to hire people to help.

• If the job is to be done the way you want it done, you have to monitor your employees' performance.
• As output increases, the cost of monitoring can go up.
• A lot of big firms have layers of bureaucracy devoted to monitoring employees.

• Middle managers monitor a lot.

• Team spirit is very important in most types of production.
• Production slows considerably when the team spirit is lost.
• The bigger the firm, the harder it is to maintain team spirit.

• The bigger things get, the more checks and balances are needed to ensure that all the components of production are coordinated.

• Large firms are able to solve these problems.

• Monitoring and loss of team spirit can limit the size of firms.
• In diseconomies of scale, less output is produced for a given increase in inputs, so that per-unit costs of output increase.

• Sometimes in a range of output, a firm doesn't experience economies of scale or diseconomies of scale.

• Team spirit is lost before monitoring costs rise.

• The long-run and short-run average cost curves have the same shape.
• There are different reasons why they have this U shape.

• The long-run average total cost curve considers age costs down, then diseconomies of scale drive average costs up.

• Firms attempt to scale play important roles in real-world expand their markets either at home or abroad because of the economies of scale.
• If they can sell more at lower production decisions.

• Diseconomies of scale prevent a firm from expanding and can lead corporate raiders to buy the firm and break it up in the hope that the smaller production units will be more efficient.

• Since all inputs are flexible, long-run cost will always be less than short-run cost at the same level of output.
• A firm that had planned to produce 100 units now plans to produce more than 100.
• The firm chooses the lowest-cost method in the long run.
• All expansion must be done by increasing only the variable input.
• The constraint must increase average cost in order to make up for what average cost would have been had the firm planned to produce that level.
• In the long run, the firm would have chosen that new combination of inputs.

• At the planned output level, short-run average total cost equals long-run average total cost, but at all other levels of output, short-run average total cost.
• The relationship is higher than the average.

• The long-run average total cost curve is only one point.

• Lower the structure of the book will help you save money.
• The length of textbooks is because they are continually looking long.
• They are to your advantage.

• The majority of the books are fixed in relation to the groups that they are for.
• The total price of the book is due to the fact that takes pre are 20 percent of cedence.

• This doesn't mean that the costs of textbooks will go up.
• Recently, length allows the writer to include more issues that professors want, and many professors want, and students began to complain that the texts were get even consider using.
• Even shorter print textbooks can allow publishers to sell more books.
• The fixed costs of print textbooks will be divided over more output in e-books.
• The weight doesn't matter.
• The role of pub crease in fixed cost per unit can lower average total cost lishing companies is changing from providing textbooks to more than increasing the length of the book increases.
• If the added length increases can be adjusted as they see fit, it can lower the amount of online learning that is delivered in the most efficient manner.

• From the figure, it should be clear why it is called an envelope relationship.
• The long-run average total cost curve touches each short-run average total cost curve at one and only one output level.
• The long-run average total cost curve is similar to the short-run average total cost curves.

• The reason why the short-run average total cost curves always lie above the long-run average cost curve is simple.
• If you choose a plant that is fixed, its costs for the period are part of your average fixed costs.
• Changes need to be made in the confines of that plant.
• You can change everything in the long run if you choose the right combination of inputs.

• The lower the costs of production, the more options you have to choose from.
• If you put additional constraints in another way, they will always raise costs.

• Costs have to be the same or lower in the long run.

• When there are economies of scale and you have chosen an efficient plant size for a given output, your short-run average costs will fall as you increase production.

• The age total cost has to be falling.
• Your fixed costs are high.
• You increase production when demand increases.
• Your age fixed costs are high; your marginal costs are low; and initially the fall in average fixed costs more than offsets the increased marginal cost.

• This point is the least-cost level of a firm.

• The technical nature of costs and production has been discussed in this chapter.
• Costs of production and the supply of goods will be explained in the next chapter.
• As a bridge between the two chapters, let's consider the entrepreneur, who establishes the relationship between costs and the supply decision, and discuss some of the problems of using cost analysis in the real world.

• The revenue received for a good must be more than the cost of educating it to be considered a good.
• The supplier's average total costs of supplying the expected economic profit per unit are the difference between the expected price and the average cost of a good.
• The dynamics of production good for a good to be supplied are underpinned by profit.

• Cost curves don't become supply curves through magic.
• entrepreneurial initiative is needed to move from cost to supply.
• The person who organizes production is the one who convinces the individuals who own the factors of production that they want to produce that good.
• Businesses work hard to maintain their employees' spirit.
• The greater the incentive to tackle the organizational problemsentrepreneur central to the production and supply the good has, the greater the role of the total cost.

• The role of the entrepreneur is not easy to capture in models.
• Entrepreneurs turn new technologies into usable goods and services.
• The hidden element of supply is essential to the continued growth of an economy.
• Financial reward is a part of the effort, but it is not always the main motivation.
• Recognition, fame, and just the pleasure of seeing something done efficiently and well are some of the desires people have.

• It depends on the curves being smooth, a standard assumption of the model.
• The model and assumption make it a smooth continuous movement, but this would make movement from the long to the short run a jump.
• If your intuition doesn't lead you to understand the model, you are probably thinking of a model with different assumptions.

• You will be in good company.
• Jacob Viner's intuition led him to a different result because his analysis was based on different assumptions than his formal model.

• There has been an increase in social entrepreneurship in recent years.

• An example is Novo Nordisk.
• The company's goal is more than just profit.
• A triple bottom line is what it calls a profit bottom line.
• It tries to be financially responsible and socially responsible.
• For-benefit corporations allow people to fulfill their social and material welfare goals at the same time.
• According to advocates, for-benefit corporations will become a new "fourth Sec tor" in the U.S. economy.

• Students walk away from an introductory economics course thinking that cost analysis is a relatively easy topic.
• You're home free if you remember the names, shapes, and relationships of the curves.
• That's correct in the textbook model.
• In real life, it's not because actual production processes are marked by economies of scope, learning by doing and technological change, many dimensions, unmeasured costs, joint costs, indivisible costs, uncertainty, asymmetries, and multiple planning and adjustment periods with many different short

• The cost of production depends on what other products are being produced.
• Once a firm has set up a large marketing department to sell cereals, the department might be able to use its expertise in marketing a different product.
• A firm that sells gasoline can use its gas station attendants to sell things.
• The minimarts were developed because gasoline companies became aware of the economies of scope.

• Firms' decisions about what to produce are influenced by economies of scope.
• They look for economies of scope and scale.
• Think about the economies of scope when you read about firms' mergers.
• economies of scope explain many unexplained mergers between firms.

• The difference between economies of scope is more important to firms in their production decisions.

• The costs of marketing, advertising, and distribution are often larger components of the cost of a good than are manufacturing costs.
• U.S. companies are specialized in the marketing, distribution, and production aspects of the process.

• He believes that firms should include social duction decision as a cost-based decision.
• New models of the firms that lowest-price input should be developed because of the norms in their decision making.
• Social Norms are believed to be incorporated in the decision process of modern economists.

• Corporations would start thinking in terms of play.
• They are working to come up with models that are similar to social norms.
• One of the most important of those norms is loyalty, and the choices that people make make it possible for them to extend themselves to a firm.
• Dan Ariely believes that be flexible, concerned, and willing to pitch in.

• They expand into new areas to take advantage of the scope in distribution and marketing.

• It is mostly a U.S. marketing and distribution company.
• In order to take advantage of economies of scope in its marketing and distribution specialties, Nike expanded its product line from just shoes to a broader line of sports cloth ing.

• There are many examples of Nike.
• Firms are constantly reinventing themselves because of the large wage differentials in the global economy, and to add new busi nesses where their abilities can achieve synergies and economies of scope.

• The production terminology that we've been discussing is important to the standard eco nomic models.
• Other terms and concepts are also impor tant in the real world.
• These changes can't be predicted.

• People learn by doing and by doing people learn by doing.
• Learning the average cost curve is not part of the traditional economic model.

• Practice makes better and more efficient.
• Many firms think worker productivity will increase by 1 or 2 percent a year, even if inputs or technologies don't change, because employees learn by doing

• The importance of the past in trying to predict performance is emphasized by the concept of learning by doing.
• There are two applicants for the job of managing the restaurant.

• In the last 85 years, the nature of production has changed.
• The left picture shows a 1933 production line in which people did the work as goods moved along the line.
• There is a modern production line in the picture on the right.

• Most of the work is done by robots.

• A restaurant that failed was run by an OK student.
• The answer is not clear.
• The lack of experience will likely mean that the person won't be hired.
• Busi nesses give a lot of weight to experience.
• The second candidate will be the better candidate because she will have learned lessons from failing.

• In the early 1990s, U.S. firms were invited to expand into the new market economies of Eastern Europe.

• The range of production can be increased by technological change.
• At one point buildings were made of wood, cloth was made from cotton and wool, and automobile tires were made from rubber.
• As a result of technological change, many tires are made from petroleum distillates, cloth is made from synthetic fibers, and buildings are constructed from steel.

• Technology is taken as a given by the standard long-run model.

• Firms' decisions and production can be affected by technological change.

• In some industries, technological change is so fast that it overwhelms other cost issues.
• The digital electronics industry is a good example.
• Firms in that industry have plans for technological change.
• Moore's law states that the cost of computing will fall by half every 18 months.
• The computer was first offered to the mass retail market.

• Other industries have been affected by increased computational power.
• We no longer talk about changes in a good, but rather the development of entirely new goods and ways of doing things, because of the dramatic technological change.
• Consider consumer goods.
• Cell phones have replaced telephone landlines, which have been replaced by computers with voice and messaging capabilities.
• wire less video streaming has replaced VCRs.
• Music isn't played from CDs as it used to be, but is streamed online, either by you or a program such as Spotify.
• You don't buy paper books, but you do buy online multimedia products that have written components.

• Computational technology has made automobiles more reliable and more expensive.
• I could modify my car in the 1960s.
• Modern cars do not have such parts.
• When a car isn't running right, the owner needs to take it to a garage that will hook it up to a computer that will tell them what's wrong.
• Lifting the hood is no longer possible.
• Electric engines will soon replace gas engines.

• The engine in the car is not the only thing that is changing.
• The driving is as well.

• The introduction of computer technology has led to a decline in the price of automobiles.

• These examples show how technological change can cause prices to fall more and more.

• Don't think that technological change is limited to high-tech industries.
• Chicken production undergoes technological change.
• Chickens have fallen in price over the industries.

• Chickens were raised in farmyards.
• They ate scraps and fed the chicken.
• It took space which cost money, it was difficult to standardize, it used energy which meant more feed per pound of chicken, and sometimes it led to disease, since chickens walked.

• The technological change was to put the chickens in wire cages so that the manure falls through to a conveyor belt and is transferred outside.
• Chickens are fed food with antibiotics to prevent disease.
• Soft music is played to keep them calm.
• They are slaughtered in a similar way once they reach the proper weight.
• It's not clear how the chick feels about this technological change.

• This method of raising chickens will likely be replaced in the next couple of decades by another technological change--genetic engineering that will allow chicken parts to be produced directly from single cells.

• The effect of learning by doing and technological change is built into the firm's pricing structure.
• Businesses might bid low for a big order to give themselves the chance to lower their costs through learning or technological change if they expect their costs to fall with more experience or if they expect technological advances to lower costs in the future.

• Learning by doing is related to technological change.
• Chicken production did not come about overnight.

• Firms learned how to do production and cost analysis for 20 years.
• As scientists and firms learn more about cloning and DNA, genetic reproduction of chicken parts will evolve.

• The standard model only takes how much to produce into account.
• Each of the questions has its own marginal costs and relates to a different aspect of the production decision.

• There are 10 or 20 good economic decisions.
• Good economic decisions take relevant margins into account.

• The reason that the traditional model is important is that each of these questions can be analyzed using the same reasoning used in the traditional model.

• The costs you find in a firm's accounts are not the relevant costs.

• Economists include in costs what their theory says should be.
• All opportunity costs are included.
• Accountants who have to measure firms' costs in practice and provide the actual dollar figures take a much more pragmatic approach.

• In order to highlight the distinction, let me review the difference between implicit and explicit costs, and introduce another difference-- how economists and accountants measure depreciation of capital.

• First, say that a business makes 1,000 widgets2 and sells them for $4 each for a total revenue of $4,000.
• The owner of the business had to buy $1,200 worth ofwidgetoo to make these wid gets.
• The firm's profit was $2,800 and the total cost was $1,200, according to an accountant.
• The costs that can be measured are explicit.

• Jim Economic profit is different as the firm's owner.
• An economist would pay himself $1,000.
• The accountant's calculation doesn't take into account the time and effort of the firm, which adds up to $2,000.
• The total that the owner put into making the widgets would be said to be by an economist.

• If the business takes 400 hours of the person's time and the person could have earned $8 an hour working for someone else, then the person is forgoing $3,200 in income.
• It's a wonderful little device that's different from a wadget.
• The production process of fruit flies is simple, unlike most real-world production processes.

• If the implicit cost is included, what looks like a $2,800 profit becomes a $400 economic loss.

• A $10,000 machine is meant to last 10 years.
• After a year, machines like that are in short supply and their value increases to $12,000.
• The machine's depreciation for each of its 10 years of existence would be $1,000 if an accountant looked at the firm's costs that year.
• An economist would say that since the value of the machine is rising, it has no depreciation and provides a revenue of $2,000 to the firm.
• The standard model assumes that all costs are measurable in a single time period, avoiding the messy real-world issues of measuring depreciation costs.

• The standard model can be expanded to include these real-world problems.
• As computing and information processing costs fall, the model provides a good framework cost accounting and production decisions are becoming more and more integrated with for cost analysis.

• Every industry has its own economic analysis software.
• Robert Kaplan of the Harvard Business School believes that cost accounting systems based on fixed and variable costs lead firms to make the wrong decisions.

• In many industries, direct labor costs have fallen while overhead costs have gone up.
• This change in costs facing firms requires a much more careful division of overhead costs and a recognition that what should and should not be assigned as a cost to a particular product differs with each decision.

• I don't discuss them because I think the standard model is enough to learn in an introductory course.
• In the same way that learning the rules of mechanics provides you with the basics of mechanical engineering, learning the standard model provides you with only the cost analysis.
• Building a machine requires years of experience, as well as a knowledge of the laws of mechanics.
• Introductory economics can help you start to think about real-world cost measurement, but it can't make you an expert cost analyst.

• The discussion of production, cost, and supply is over.
• It will take at least two or three reads and careful attention to your professor's lecture before your mind can absorb the material in the two chapters we spent on them.
• If you're going to sleep through a lecture, the ones on these chapters aren't for you.

• As long as you remember that it is only a framework, you will be able to get into interesting real world issues.
• To truly understand those issues, you have to know the basics.
• Unless you really feel comfortable with the analysis, it's probably time to review them from the beginning.

• There is an envelope relationship between short and long, but a technically run average cost curve and long run average cost efficient process need not be economically curves.
• The average cost curves are efficient.

• The average total cost is caused by economies of scale initially and eventually by diseconomies.

• Once we start applying cost analysis to the real phenomenon, we must include a variety of other dimensions, and that's why diseconomies of scale of costs are important.

• Downsizing of scope, learning by doing and technological marginal productivity affect the costs in the real world.
• The long-run average cost change, the many dimensions to output, and curve slope upward because of unmeasured costs.

• There is a difference between technical efficiency and 2,000 hours of labor.

• One farmer can grow a lot of corn.
• Is it possible for both methods to take 200 hours of labor and 20 pounds of seed?

• Another farmer can grow a lot of corn.

• A student just wrote on an exam.

Is it possible that the two production processes go in opposite directions?

• A dressmaker can sew 800 garments.
• If fabric and labor are used, diseconomies of scale will never happen.

• Ford took advantage of 10.

• A total cost curve can be drawn.

• The average cost is $30 and the price is d.

• Sea lions deplete the stock of trout.

• The cost of making the first whale is $16,000, which means that the cost curve is downward-sloping.

How does learning affect total?

What is the likelihood that a firm is learning by doing?

• Questions from Alternative Perspectives 1.

• Firms have an incentive to externalize their costs.

• A major survey was conducted by economists.

• Adam Smith argued that at birth most people were similar to work groups and that differences in individual abilities were the result of the high road.
• The low road Walmart-like approach to cost saving has implications.

• A pair of shoes that retails for $28.79 has an approximate value of $1.25 per meal.
• The marginal cost should include more costs, such as the saved space from fewer students using the facilities and the reduced labor expenses on food preparation, according to students.

• The marginal cost can be raised to $6.00 by manufacturing labor.

• Factory overhead is operating.

• Jacob Viner told his draftsman to make sure that all the marginal cost curves went through.

• Viner told him to do it.

• The cost of setting up a steel mill is enormous.

• A major issue of contention at many colleges is the quote "To make operations even margin cost of meals that is rebated when a student does not sign ally profitable, big steelmakers must run full-out."
• It's ready for the meal plan.

• Answers to Margin Questions 1.
• The short-run average cost curve slopes down if the method that produces a given level of output at the ward because of increasing marginal productivity and lowest possible cost also uses as few inputs as large average fixed costs.

• Bangladesh uses more labor intensive techniques.

• The long-run average total cost curve is lower in Bangladesh than it is in the United States due to the fact that there are economies States.
• Production in both countries is economical and efficient.

• Economic activity is more than just happening.

• Larger production runs are usually cheaper than individual production.
• Individual is called an entrepreneur because of indivisible setup costs.

• Economies of scale occur because of 4.
• The same technical process could be used to increase the amount of good a firm is producing.

• Different types curve will never become upward-sloping.

• An economist would say that he doesn't know what total it is because it is a change in the technical characteristics cost without knowing what Jim could have earned.
• It doesn't cause the cost curve to be had done another activity instead of running his downward-sloping--it causes it to shift business.

• A firm can vary more than one factor.
• Firms have to decide which combination of factors of production to use.

• Let's say it chose an output of 60 pairs to minimize the cost of production.

• We use what is cal ed an lyst to place one factor of production in a graph.
• 8 pairs of firms can produce the same amount of output at any point in the isoquant curve.
• So, given a pair of earrings.

• If a firm can produce 60 pairs of earrings with both factors and any point in the brown shaded area, they should send less of one or both factors.

• The technical limits of production are shown in the table.

• Let's take a look at some points on the curve.

• The isoquant curve is bowed inward.

• The isoquant is 2 4 6 8 10 12 14 16 18 20 downward-sloping.

• 3 workers are on the slope of the isoquant.
• The marginal rate of substitution is decreasing if the firm wants to reduce it.

• In Figure A12-2 labor by 1 is needed to keep output constant.

• It is possible for the firm to keep output constant at 60.
• 100 is shown in Figure A12-3.

• Each curve has a different level of output.

• The lowest level of output in the production table is 40 and the isoquant curve was not randomly chosen.
• The highest level of output is III.
• The curve is bowed inward when a firm chooses to be consistent with the law of diminishing marginal pro ductivity.
• The techni cal considerations are embodied in the law of diminishing marginal productivity.
• If a firm adds more and more of one factor, it has to use more of the other factor in order to keep output constant.
• Initially, it might add a machine to replace a worker.

• To say an output level is choosing one of those isoquants.

• Say the firm starts with 20 machines and no labor.
• If the firm wants to combine labor and machinery, it can give up.
• We have to bring in the machines to purchase units of labor for some machines because they use less move to economic efficiency.
• It gives up costs of production.
• 5 machines left it with 15.
• Each point on the isocost line costs the firm $60.
• You cost the firm the same amount.

• Can buy with $60 if labor costs $5 a unit.

• To answer that question, we need to go through a couple of examples that would make it to create a curve.
• What would happen to the isocost line inputs if the firm got $60?
• If the firm increases its spending on production lowing manner, we will do so.
• $60 on labor is enough to see the effect.
• If it spent all of it on labor, it could buy 18 12 units of labor.
• The alternative is represented by units of labor.

• Since machines cost $3 a unit, we can curve to the right of the original curve.

• Two points on the isocost curve are determined by factors of production.
• The assump didn't change.

• If you said the iso.

• 60 pairs of 2 4 6 8 10 12 14 16 18 20 earrings with $60 is an efficient combination of resources.

• In Figure A12-5, we do that.

• It makes sense.

• As many machines as possible is a problem for the firm.

• The factors of production are put in technical terms.

• Initially, let's say the factor prices.
• 60 pairs of earrings are produced.
• 60 pairs of earrings will cost more than $60.

• If it fires a worker.

• Say that the isoquant is producing only 40 pairs.

• The amount of labor and machines manager will conclude that you can't produce 60 for $60.

• You want to spend $60 if the firm has an efficient manager who rises to $5.
• What will be done with introductory economics?

• The isocost curve should be drawn for a firm with $100 to spend.

• Labor and materials are included in input.

How does technological innovation affect the cost of labor and materials?

How does the price of the input change on your answer?

• Use isocost/isoquant analysis to show how firms are in the same budget.

• If it keeps the same budget, show the difference between economic efficiency.