Production Theory-Roles, Objectives and basic analysis

Production Theory:

How to define a ‘Firm’? – Roles, Objectives, and more:

a) Specialization in production.

b) Team production is more proficient than individual production in many aspects.

  • Less transaction costs however more monitoring costs in firm.

c) Internal control than external market transactions with a lots of transaction cost.

  • Opportunistic behaviours because of asset specificity.
  • However is internal control always reasonable? Not really. Why?
  • Example: Vehicle brand owner

d) Profit-maximizers?

e) Ownership as well as management are separated.

Production Technology: Basic Analysis

a) Time periods: SR with at least one fixed input/LR with all variable inputs

b) Production function (total product curve)

Q = f (L, K) ...............(1)

Q: is maximum amount of output a firm could obtain from a given combination of inputs. Therefore inefficient management could reduce output from what is technologically possible. If we invert the equation (1) to get L = g(Q), which tells us the minimum amount of labor L required to produce a given amount of output Q, this function is labor requirement function.

TPL, MPL and APL:

APL = Q/L                       

MPL= dQ/dL

Up to I (inflection point), MPL is increasing (increasing marginal returns to labor), and after that MPL starts diminishing.

Up to S, APL is increasing, so APL < MPL .

After S, APL is decreasing,

APL > MPL

Law of Diminishing Marginal Returns: Principle that as the usage of one input raises the quantities of other inputs being held fixed a point will be reached beyond which the marginal product of the variable input will decrease.

574_diminishing marginal returns.jpg

Latest technology based Microeconomics Online Tutoring Assistance

Tutors, at the www.tutorsglobe.com, take pledge to provide full satisfaction and assurance in Microeconomics help via online tutoring. Students are getting 100% satisfaction by online tutors across the globe. Here you can get homework help for Microeconomics, project ideas and tutorials. We provide email based Microeconomics help. You can join us to ask queries 24x7 with live, experienced and qualified online tutors specialized in Microeconomics. Through Online Tutoring, you would be able to complete your homework or assignments at your home. Tutors at the TutorsGlobe are committed to provide the best quality online tutoring assistance for Microeconomics Homework help and assignment help services. They use their experience, as they have solved thousands of the Microeconomics assignments, which may help you to solve your complex issues of Microeconomics. TutorsGlobe assure for the best quality compliance to your homework. Compromise with quality is not in our dictionary. If we feel that we are not able to provide the homework help as per the deadline or given instruction by the student, we refund the money of the student without any delay.