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Optimizing Production Factors: Short-Run vs. Long-Run Output Increases" (66 characters)

Explore the dynamics of MPP increases in short-run vs. long-run scenarios, covering returns to scale, cost reduction possibilities, and factors' combinations for efficient output. Learn the basics of economics and the location decision's impact on industry size and external economies of scale. Discover the significance of the marginal product approach and achieve optimal factor combinations for maximizing productivity and minimizing costs in multi-factor scenarios.

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Optimizing Production Factors: Short-Run vs. Long-Run Output Increases" (66 characters)

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  1. Short-run & long-run increases in output MPP Increase 20 20 15 25 10 30 5 35 Diminishing returns to variable factor Increasing returns to scale

  2. Introductory Economic Lecture 14

  3. Recap

  4. The ‘scale’ of Production And ‘return’ to scale

  5. The Location decision

  6. Industry size And ‘External’ Economics of scale

  7. The Optimum Combination of Factors: The marginal Product Approach

  8. It would be possible to reduce cost per unit of output by using a different combination of labor and capital MPPK MPPL if ≠ PL PK EXAMPLE MPPK MPPL if > PL PK More labor should be used relative to capital, since the firm is getting a greater physical return for its money from using extra workers than it is getting from using extra capital. However as more and more labor is used, diminishing returns to labor set in. Thus MPPL will fall. Likewise, as less capital is used, MPPK will rise. Until Technical or productive efficiency point MPPL MPPK = PL PK

  9. Multi factor case MPPa MPPb MPPc MPPn = = = Pa Pb Pc Pn Where a . . . n are different factors of production

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