1. Δ
  2. Floating Topic
  3. Production
    1. Not Necesarily Manufacturing
      1. there is also services
    2. Combining inputs to obtain goods of services
      1. Inputs
        1. Resources
          1. Labor
          2. Capital
          3. Physical
          4. Human
          5. Land
          6. Entrepreneurship
          7. Focus most on these
          8. Cost most of production
        2. Other inputs
          1. Electricity
          2. Transportation
          3. Raw materials
          4. Internet
          5. ect.
        3. Time Horizons
          1. Long Run
          2. Long enough to adjust quanity of inputs
          3. All inputs are variable
          4. vs
          5. Short Run
          6. Variable Inputs
          7. Quantity can be adjusted
          8. Fixed Inputs
          9. Quantity cannot be adjusted
          10. At least one input for which cannpt adjust quantity
          11. at least one is a fixed variable
      2. Technology
        1. Methods to combining inputs
      3. Firms will choose cheapest way
    3. EX:
      1. Spotless Car Wash
        1. Produce
          1. Service
          2. Wash cars
        2. Inputs
          1. Physical Capital
          2. Automated Car wash lines
          3. Labor
          4. Full time employees
          5. Other Inputs
          6. Water
          7. Electricity
          8. Soap
          9. These will not be focussed on
        3. Short Run
          1. Capital
          2. Number of Car wash lines
          3. Fixed Variable
          4. 1 line
          5. Labor
          6. workers
          7. Variable input
          8. Quantity
          9. Number of Cars washed a day
          10. Graph
          11. <html><img src="quantity Production.JPG">
          12. <html><img src="graph production short term.JPG">
  4. Marginal Product of Labor
    1. MPL = Quantity Change / Labor Change
    2. Marginal Returns to Labor
      1. Increasing MRL
        1. Increase MPL
        2. Gains from Specialization
      2. Decrease MRL
        1. Decrease MPL
        2. Less Gains from specialization
          1. Each has less fixed input to work on
    3. Law of Diminishing Returns
      1. As you add more units of any input while keeping other inputs fixed
        1. Returns to this input become diminishing
      2. Add more people to work on car wash line
        1. Eventually there is too many people working on one thing
    4. Rises then Falls
  5. MPL vs MC
    1. Marginal product of labor
      1. Low Q
        1. MPL Rising
          1. Each additional worker adds more units at output
          2. Each additional unit of output requires fewer workers
          3. Each Additional unit of output brings lower costs
      2. High Q
        1. MPL Falling
          1. each additonal worker adds fewer units of output
          2. each unit of output requires more workers
          3. Each unit of output costs more
        2. U shaped curve
    2. Marginal Cost
      1. Graph
        1. <html><img src="average and marginal costs.JPG">
    3. EX:
      1. We have 5 midterms
        1. Test 0
          1. Total score
          2. 0
          3. Average Score
          4. 0
        2. Marginal Score 0 to 1
          1. 100
          2. This is test score
        3. Test 1
          1. Total score
          2. 100
          3. Average Score
          4. 100
        4. Marginal Score 1 to 2
          1. 50
          2. This is test score
        5. Test 2
          1. Total score
          2. 150
          3. Average Score
          4. 75
        6. Marginal Score 2 to 3
          1. 60
          2. This is test score
        7. Test 3
          1. Total score
          2. 210
          3. Average Score
          4. 70
        8. Marginal Score 3 to 4
          1. 70
          2. This is test score
        9. Test 4
          1. Total score
          2. 280
          3. Average Score
          4. 70
        10. Marginal Score 4 to 5
          1. 80
          2. This is test score
        11. Test 5
          1. Total score
          2. 360
          3. Average Score
          4. 72
      2. Table
        1. Topic
  6. Business Firms
    1. Organizations
    2. owned and operated by pricate individuals
    3. Specialized in production
    4. Focussed on Maximizing profit
      1. Profit
        1. Total Revenue - Total Cost
  7. Short Run Costs
    1. Total Cost of Producing a quantity of output is
      1. Opportunity cost of this production
        1. Face by owners
    2. Sunk Cost
      1. EX:
        1. Company Makes Acne Drug
          1. Cost to produce
          2. $10,000
          3. Anticipate to Sell for
          4. $30,000
          5. Find out it wont work
          6. They sell it as an anti-fungus
          7. Cost of production
          8. Irelevant
          9. Sunk Cost
      2. Sunk costs are not considered when making business decisions
    3. Explicit Costs
      1. Land
        1. Rent
      2. Labor
        1. Pay Wage to Manager
      3. Capital
        1. Take a load
          1. $100,000
          2. Interest Rate: 5%
          3. Payments of $5,000
      4. Involving actual Payments
      5. Graph
        1. Topic
    4. Implicit Costs
      1. Land
        1. Use your own Property
          1. Opportunity Cost
          2. Rent paid
      2. Labor
        1. Manage own business
          1. Foregone Wages Paid
      3. Capital
        1. Use own money
          1. $100,000
      4. No money changes hands
      5. Graph
        1. <html><img src="explicit implicit costs.JPG">
    5. Total Costs
      1. Total Fixed Costs
        1. TFC
          1. total costs of fixed inputs
        2. AKA
          1. Overhead costs / Overhead
      2. Total Variable Costs
        1. TVC
          1. total costs of variable inputs
      3. TVC + TFC
      4. Total Cost Curves
        1. Graph
          1. Topic
    6. Average Costs
      1. Average Fixed Cost
        1. AFC=
          1. TFC/Q
      2. Average Variable Cost
        1. AVC=
          1. TVC/Q
      3. Average Total Cost
        1. ATC=
          1. TC/Q
          2. AFC + AVC
      4. Graph
        1. Topic
        2. Topic
    7. Marginal Costs
      1. MC =
        1. ΔTC/ΔQ
      2. Tells us how much cost rises per unit increase in output
  8. Long Run
    1. All inputs are variable
    2. Least Cost rule
      1. Example
        1. Graph
          1. Topic
      2. Trying to spend the least
        1. Done by choosing best combination of variables
    3. Total Costs
      1. EX:
        1. Graph
          1. Topic
        2. Long Run Average Total Costs
          1. LRATC
          2. LRATC = LRTC/Q
          3. Just like ATC = TC/Q
          4. Economies of Scale
          5. Increase of output
          6. Causes LRATC to decrease
          7. Enjoying Economies of Scale
          8. What is it caused by?
          9. Specialization
          10. Worker becomes more efficient at producing pizzas
          11. Output increasing
          12. Lumpy Inputs
          13. Can only buy one X-Ray Machine
          14. No 1/2, 1/3, 1/4 of a machine
          15. Each person that pays to use the machine makes the machine cost less
          16. Long Run TC rises proportionally < output
          17. LRATC Curve Slopes Downward
          18. Graph
          19. Topic
          20. Diseconomies of Scale
          21. Most Common
          22. Big Companies
          23. Many High/mid/low managers
          24. Many Employees
          25. Could steal product or time
          26. Paying lots of employees
          27. Output isnt going up
          28. Long run TC rises proportionally > than output
          29. LRATC Curve Slopes Upward
          30. Graph
          31. Topic
          32. Constant Returns of Scale
          33. When both output and long-run TC rise from same proportion
          34. Minimal Efficient Scale
          35. Mergers
          36. Example
          37. 6 Firms in an Industry
          38. Each produce
          39. 10,000
          40. firms are unefficient
          41. can only sell them for $200
          42. 3 Firms Merge
          43. Each Firm produces
          44. 20,000
          45. Sold for
          46. $80
          47. Become more efficient
          48. Quantity demanded
          49. 60,000
      2. AKA
        1. Long run total costs
          1. LRTC
          2. These costs can be less than or equal to Total costs (Short Run)
          3. Cannot be greater
          4. Due to more variables be changed to produce maximum output
    4. Plant
      1. Set Fixed input
        1. Combinations of long run variables
      2. Plant size
        1. Short Run
          1. Plant set at a given size
        2. Long Run
          1. Can adjust the size of plant
      3. EX:
        1. Graph
          1. Topic
          2. This graph is used to determine which combination of inputs will yield the least cost
          3. Look to be "scalloped" curves