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Properties of Production Functions

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

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  1. Properties of Production Functions Lectures in Microeconomics-Charles W. Upton

  2. A Tabular Presentation Properties of Production Functions

  3. A Production Isoquant Properties of Production Functions

  4. Second Production Isoquant Properties of Production Functions

  5. Third Production Isoquant Properties of Production Functions

  6. Some Points on Isoquants Properties of Production Functions

  7. Properties of Production Functions • Constant Returns to Scale • Diminishing Marginal Rate of Technical Substitution (MRTS) • Diminishing Returns to Proportion Properties of Production Functions

  8. Constant Returns to Scale Properties of Production Functions

  9. Constant Returns to Scale Properties of Production Functions

  10. Constant Returns to Scale Properties of Production Functions

  11. Constant Returns to Scale Double inputs; double outputs Properties of Production Functions

  12. Constant Returns to Scale Not always true Properties of Production Functions

  13. Diminishing Marginal Rate of Technical Substitution (MRTS) Properties of Production Functions

  14. Diminishing MRTS I replace the first worker with one machine. Properties of Production Functions

  15. Diminishing MRTS Two machines are required to replace the second. Properties of Production Functions

  16. 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

  17. Diminishing MRTS This is diminishing marginal rate of technical substitution (MRTS). Properties of Production Functions

  18. Diminishing MRTS MRTS is like MRS. Properties of Production Functions

  19. Diminishing Returns to Proportion Two machines Properties of Production Functions

  20. Diminishing Returns to Proportion One factor fixed, one variable. A short run production function Properties of Production Functions

  21. Diminishing Returns to Proportion Properties of Production Functions

  22. Diminishing Returns to Proportion Properties of Production Functions

  23. Diminishing Returns to Proportion Properties of Production Functions

  24. Diminishing Returns to Proportion Average product (AP) and marginal product (MP) are not the same. Properties of Production Functions

  25. Diminishing Returns to Proportion MP and AP are declining. Properties of Production Functions

  26. Diminishing Returns to Proportion They may initially rise but must eventually decline. Properties of Production Functions

  27. Diminishing Returns to Proportion Marginal product can be zero but not negative Properties of Production Functions

  28. Summary • Constant Returns to Scale • Sometimes, but not always Properties of Production Functions

  29. Summary • Constant Returns to Scale • Sometimes, but not always • Diminishing MRTS • Always Properties of Production Functions

  30. 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

  31. 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

  32. 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

  33. End ©2003 Charles W. Upton Properties of Production Functions

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