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SHORT-RUN THEORY OF PRODUCTION

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SHORT-RUN THEORY OF PRODUCTION

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    1. SHORT-RUN THEORY OF PRODUCTION Profits and the aims of the firm Long-run and short-run production: fixed and variable factors The law of diminishing returns The short-run production function: total physical product (TPP) average physical product (APP) marginal physical product (MPP) the graphical relationship between TPP, APP and MPP

    2. Wheat production per year from a particular farm (tonnes)

    3. Wheat production per year from a particular farm

    4. Wheat production per year from a particular farm

    5. Wheat production per year from a particular farm

    6. Wheat production per year from a particular farm

    7. Wheat production per year from a particular farm

    8. Wheat production per year from a particular farm

    9. Wheat production per year from a particular farm

    10. Wheat production per year from a particular farm

    11. Wheat production per year from a particular farm

    12. Wheat production per year from a particular farm

    13. LONG-RUN THEORY OF PRODUCTION All factors variable in long run The scale of production: constant returns to scale increasing returns to scale decreasing returns to scale

    14. LONG-RUN THEORY OF PRODUCTION Economies of scale specialisation & division of labour indivisibilities container principle greater efficiency of large machines by-products multi-stage production organisational & administrative economies financial economies economies of scope

    15. LONG-RUN THEORY OF PRODUCTION Diseconomies of scale External economies and diseconomies of scale Optimum combination of factors MPPa/Pa = MPPb/Pb ... = MPPn/Pn

    16. ISOQUANT- ISOCOST ANALYSIS Isoquants their shape diminishing marginal rate of substitution isoquants and returns to scale isoquants and marginal returns Isocosts slope and position of the isocost shifts in the isocost

    17. An isoquant

    18. An isoquant

    19. An isoquant

    20. Diminishing marginal rate of factor substitution

    21. Diminishing marginal rate of factor substitution

    22. An isoquant map

    23. An isoquant map

    24. An isoquant map

    25. An isoquant map

    26. An isoquant map

    27. An isocost

    28. An isocost

    29. An isocost

    30. An isocost

    31. ISOQUANT- ISOCOST ANALYSIS Least-cost combination of factors for a given output point of tangency comparison with marginal productivity approach Highest output for a given cost of production

    32. Finding the least-cost method of production

    33. Finding the least-cost method of production

    34. Finding the least-cost method of production

    35. Finding the least-cost method of production

    36. Finding the maximum output for a given total cost

    37. Finding the maximum output for a given total cost

    38. Finding the maximum output for a given total cost

    39. Finding the maximum output for a given total cost

    40. Finding the maximum output for a given total cost

    41. Finding the maximum output for a given total cost

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