10/11/15
Lesson 1: Cost Theory
Learning Objective: I can define, explain and distinguish between the concepts of the short run and the long run in the context of production.
DA: In your opinion, explain which government interventionist policy from chapter 5 is most sensible.
DA: In your opinion, explain which government interventionist policy from chapter 5 is most sensible.
Short Run vs. Long Run:
Short Run
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Long Run
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Total, average and marginal product:
Total Product (TP) = Total output that a firm produces, using its fixed and variable factors in a given time period. Average Product (AP) = Output that is produced on average, by each unit of variable factor.
Marginal Product (MP) = Extra output that is produced by using an extra unit of the variable factor.
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Diminishing marginal/average returns look at the same relationship from different angles.
Activity: Create a table from the following data- V, TP, AP and MP. Also, Identify the fixed and variable factors.
Ex. Young entrepreneur named Herson sets up a new business, a small hamburger stand on calle hambre. His business currently the following fixed factors of production: refrigerator, hamburger cart w/ three grills, menu board, and five tables w/ twenty chairs. He can make 20 burgers per hour. Demand increases so he decides increase his labor by hiring additional employees:
- Eliana = Increase TP to 50 burgers per hour.
- Andres = Increase TP to 90 burgers per hour.
- Carlota = Increase TP to 124 burgers per hour.