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3
A simple production function
# Inputs # Outputs 1 12 2 36 3 60 4 72 5 80 6 84
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MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 3 60 4 72 5 80 6 84
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MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 3 60 4 72 5 80 6 84
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MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 24 3 60 4 72 5 80 6 84
7
MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 24 3 60 4 72 5 80 6 84
8
MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 24 3 60 4 72 5 80 6 84
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MP = marginal product (=Δoutput/Δinput)
# Inputs # Outputs MP - 1 12 2 36 24 3 60 4 72 5 80 8 6 84
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AP = average product (outputs/inputs)
MP AP - 1 12 2 36 24 3 60 4 72 5 80 8 6 84
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AP = average product (outputs/inputs)
MP AP 1 12 2 36 24 3 60 4 72 5 80 8 6 84
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AP = average product (outputs/inputs)
MP AP 1 12 2 36 24 18 3 60 4 72 5 80 8 6 84
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AP = average product #I #O MP AP 1 12 2 36 24 18 3 60 20 4 72 5 80 8 6
1 12 2 36 24 18 3 60 20 4 72 5 80 8 6 84
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AP = average product #I #O MP AP 1 12 2 36 24 18 3 60 20 4 72 5 80 8 6
1 12 2 36 24 18 3 60 20 4 72 5 80 8 6 84
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AP = average product #I #O MP AP 1 12 2 36 24 18 3 60 20 4 72 5 80 8
1 12 2 36 24 18 3 60 20 4 72 5 80 8 16 6 84
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Now: Think in terms of costs
MP AP 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16 6 84 13
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FC = fixed cost #I #O MP AP FC 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16
160 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16 6 84 13
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FC = fixed cost #I #O MP AP FC 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16
160 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16 6 84 13
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VC = variable cost (= #inputs x PINPUTS)
MP AP FC VC 160 - 1 12 2 36 24 18 3 60 20 4 72 5 80 8 16 6 84 13
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VC = variable cost #I #O MP AP FC VC 1 12 2 36 24 18 3 60 20 4 72 5 8
160 - 1 12 80 2 36 24 18 3 60 20 4 72 5 8 16 6 84 13
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VC = variable cost #I #O MP AP FC VC 1 12 2 36 24 18 3 60 20 4 72 5 8
160 - 1 12 80 2 36 24 18 3 60 20 4 72 5 8 16 6 84 13
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VC = variable cost #I #O MP AP FC VC 1 12 2 36 24 18 3 60 20 4 72 5 8
160 - 1 12 80 2 36 24 18 3 60 20 240 4 72 5 8 16 6 84 13
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TC = total cost (= FC + VC)
#I #O MP AP FC VC TC 160 - 1 12 80 2 36 24 18 3 60 20 240 4 72 320 5 8 16 400 6 84 13 480
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TC = total cost (= FC + VC)
#I #O MP AP FC VC TC 160 - 1 12 80 240 2 36 24 18 3 60 20 4 72 320 5 8 16 400 6 84 13 480
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TC = total cost (= FC + VC)
#I #O MP AP FC VC TC 160 - 1 12 80 240 2 36 24 18 320 3 60 20 4 72 5 8 16 400 6 84 13 480
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MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 2 36 24 18 320 3 60 20 400 4 72 480 5 8 16 560 6 84 13 640
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MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 6.6 2 36 24 18 320 3 60 20 400 4 72 480 5 8 16 560 6 84 13 640
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MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 6.6 2 36 24 18 320 3.3 3 60 20 400 4 72 480 5 8 16 560 6 84 13 640
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MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 6.6 2 36 24 18 320 3.3 3 60 20 400 4 72 480 5 8 16 560 6 84 13 640
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MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 6.6 2 36 24 18 320 3.3 3 60 20 400 4 72 480 5 8 16 560 6 84 13 640
31
MC = marginal cost (= ΔTC/ΔQ = ΔVC/ΔQ)
MP AP FC VC TC MC 160 - 1 12 80 240 6.6 2 36 24 18 320 3.3 3 60 20 400 4 72 480 5 8 16 560 10 6 84 13 640
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AFC = average fixed cost (=FC/Q)
MP AP FC VC TC MC AFC 160 - 1 12 80 240 6.6 13.3 2 36 24 18 320 3.3 3 60 20 400 4 72 480 5 8 16 560 10 6 84 13 640
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AFC = average fixed cost (=FC/Q)
MP AP FC VC TC MC AFC 160 - 1 12 80 240 6.6 13.3 2 36 24 18 320 3.3 4.44 3 60 20 400 4 72 480 5 8 16 560 10 6 84 13 640
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AFC = average fixed cost (=FC/Q)
MP AP FC VC TC MC AFC 160 - 1 12 80 240 6.6 13.3 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 5 8 16 560 10 6 84 13 640
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AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 5 8 16 560 10 2.00 6 84 13 640 1.90
36
AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 6.66 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 5 8 16 560 10 2.00 6 84 13 640 1.90
37
AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 6.66 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 5 8 16 560 10 2.00 6 84 13 640 1.90
38
AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 6.66 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 5 8 16 560 10 2.00 6 84 13 640 1.90
39
AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 6.66 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 4.4 5 8 16 560 10 2.00 6 84 13 640 1.90
40
AVC = average variable cost (VC/Q)
MP AP FC VC TC MC AFC AVC 160 - 1 12 80 240 6.6 13.3 6.66 2 36 24 18 320 3.3 4.44 3 60 20 400 2.66 4 72 480 2.22 4.4 5 8 16 560 10 2.00 6 84 13 640 1.90
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ATC = average total cost (=AVC+AFC)
#I #O MP AP FC VC TC MC AFC AVC ATC 160 - 1 12 80 240 6.6 13.3 6.66 20 2 36 24 18 320 3.3 4.44 3 60 400 2.66 4 72 480 2.22 4.4 5 8 16 560 10 2.00 6 84 13 640 1.90 5.7
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ATC = average total cost (=AVC+AFC)
#I #O MP AP FC VC TC MC AFC AVC ATC 160 - 1 12 80 240 6.6 13.3 6.66 20 2 36 24 18 320 3.3 4.44 8.9 3 60 400 2.66 4 72 480 2.22 4.4 5 8 16 560 10 2.00 7 6 84 13 640 1.90 5.7 7.6
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