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Ch06 Production

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  Fernando & Yvonn Quijano Prepared by: Production 6    C    H    A   P   T   E   R Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall ã Microeconomics ã Pindyck/Rubinfeld, 8e.     C   h  a  p   t  e  r   6  :   P  r  o   d  u  c   t   i  o  n 2of 24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall ã Microeconomics ã Pindyck/Rubinfeld, 8e.   CHAPTER 3 OUTLINE 6.1The Technology of Production6.2Production with One Variable Input (Labor) 6.3Production with Two Variable Inputs 6.4Returns to Scale     C   h  a  p   t  e  r   6  :   P  r  o   d  u  c   t   i  o  n 3of 24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall ã Microeconomics ã Pindyck/Rubinfeld, 8e. Production The theory of the firm describes how a firm makes cost- minimizing production decisions and how the firm’s resulting cost varies with its output.The production decisions of firms are analogous to the purchasing decisions of consumers, and can likewise be understood in three steps:1.Production Technology2.Cost Constraints3.Input Choices The Production Decisions of a Firm     C   h  a  p   t  e  r   6  :   P  r  o   d  u  c   t   i  o  n 4of 24 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall ã Microeconomics ã Pindyck/Rubinfeld, 8e. THE TECHNOLOGY OF PRODUCTION 6.1 The Production Function ● factors of production Inputs into the production process (e.g., labor, capital, and materials).Remember the following: (,) (6.1) q F K L  Inputs and outputs are flows .Equation (6.1) applies to a given technology  Production functions describe what is technically feasible when the firm operates efficiently  .
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