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Properties of Production Functions. A Tabular Presentation. A Production Isoquant. Second Production Isoquant. Third Production Isoquant. Some Points on Isoquants. Properties of Production Functions. Constant Returns to Scale Diminishing Marginal Rate of Technical Substitution (MRTS)

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properties of production functions

Properties of Production Functions

Lectures in Microeconomics-Charles W. Upton

a tabular presentation
A Tabular Presentation

Properties of Production Functions

a production isoquant
A Production Isoquant

Properties of Production Functions

second production isoquant
Second Production Isoquant

Properties of Production Functions

third production isoquant
Third Production Isoquant

Properties of Production Functions

some points on isoquants
Some Points on Isoquants

Properties of Production Functions

properties of production functions7
Properties of Production Functions
  • Constant Returns to Scale
  • Diminishing Marginal Rate of Technical Substitution (MRTS)
  • Diminishing Returns to Proportion

Properties of Production Functions

constant returns to scale
Constant Returns to Scale

Properties of Production Functions

constant returns to scale9
Constant Returns to Scale

Properties of Production Functions

constant returns to scale10
Constant Returns to Scale

Properties of Production Functions

constant returns to scale11
Constant Returns to Scale

Double inputs; double outputs

Properties of Production Functions

constant returns to scale12
Constant Returns to Scale

Not always true

Properties of Production Functions

diminishing mrts
Diminishing MRTS

I replace the first worker with one machine.

Properties of Production Functions

diminishing mrts15
Diminishing MRTS

Two machines are required to replace the second.

Properties of Production Functions

diminishing mrts16
Diminishing MRTS

The fourth machine substitutes for one worker; the fifth substitutes for half a worker

Two machines are required to replace the second.

Properties of Production Functions

diminishing mrts17
Diminishing MRTS

This is diminishing marginal rate of technical substitution (MRTS).

Properties of Production Functions

diminishing mrts18
Diminishing MRTS

MRTS is like MRS.

Properties of Production Functions

diminishing returns to proportion
Diminishing Returns to Proportion

Two machines

Properties of Production Functions

diminishing returns to proportion20
Diminishing Returns to Proportion

One factor fixed, one variable. A short run production function

Properties of Production Functions

diminishing returns to proportion21
Diminishing Returns to Proportion

Properties of Production Functions

diminishing returns to proportion22
Diminishing Returns to Proportion

Properties of Production Functions

diminishing returns to proportion23
Diminishing Returns to Proportion

Properties of Production Functions

diminishing returns to proportion24
Diminishing Returns to Proportion

Average product (AP) and marginal product (MP) are not the same.

Properties of Production Functions

diminishing returns to proportion25
Diminishing Returns to Proportion

MP and AP are declining.

Properties of Production Functions

diminishing returns to proportion26
Diminishing Returns to Proportion

They may initially rise but must eventually decline.

Properties of Production Functions

diminishing returns to proportion27
Diminishing Returns to Proportion

Marginal product can be zero but not negative

Properties of Production Functions

summary
Summary
  • Constant Returns to Scale
    • Sometimes, but not always

Properties of Production Functions

summary29
Summary
  • Constant Returns to Scale
    • Sometimes, but not always
  • Diminishing MRTS
    • Always

Properties of Production Functions

summary30
Summary
  • Constant Returns to Scale
    • Sometimes, but not always
  • Diminishing MRTS
    • Always
  • Diminishing Returns to Proportion
    • AP and MP eventually must decline.

Properties of Production Functions

the final word
The Final Word

K

Our production isoquants are very smooth; substitution is easy (but diminishing MRTS).

While substitution may not always be that smooth, economists would always stress the possibilities of substitution.

Q1

Qo

L

Properties of Production Functions

the final word32
The Final Word

K

  • Substitution possibilities abound
  • There is more than one way to
    • Skin a cat
    • Bake a cake
    • Make a widget

Q1

Qo

L

Properties of Production Functions

slide33
End

©2003 Charles W. Upton

Properties of Production Functions

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