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Momma Robinson's Pizzeria Where should I produce?

Momma Robinson's Pizzeria Where should I produce?. get most production @ least cost and most profit called Profit Maxization. Factor #of Workers TP 0 0 1 6 2 15 3 26 4 40 5 55 6 71 7 81 8 90 9 96 10 95.

marietta-anglim
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Momma Robinson's Pizzeria Where should I produce?

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  1. Momma Robinson's PizzeriaWhere should I produce?

  2. get most production @ least cost and most profitcalled Profit Maxization

  3. Factor #of Workers TP 0 0 1 6 2 15 3 26 4 40 5 55 6 71 7 81 8 90 9 96 10 95

  4. PART 2: What do the graphs look like? cause resultchange factor 1 time output

  5. PART 1: law of diminishing returns look at app and mpp what happens ??????

  6. PRODUCTION change in output as MARGINAL PHYSICAL PRODUCT OR MPP0 0 16new level of production is 6- old level mpp is 6

  7. factor total production MPP new- old level 2 15 15- 6= 93 26 26-15= 4 40 40-26= 5 55 6 71

  8. workers production mpp7 81 10 8 90 99 96 6

  9. 95 negative -1 Never Produce at this point

  10. PART 2: What do the graphs look like? x axis= # of workers Y axis= app or mpp

  11. now you see the three stagesof productionIncreasing diminishing: define this production still increasing at a slower rate negative production: lessNOT TIME PERIODS BUT WHAT IS HAPPENING TO PRODUCTION

  12. COSTSFactor Production Fixed Costs#of Workers TP MPP FC0 0 0 351 6 6 352 15 9 3 26 11 4 40 14 5 55 15 6 71 16 Fixed costs do not change: will find at zero do not add them: remain the same or constant

  13. TP MPP FC7 81 10 8 90 9 9 96 6 10 95 -1

  14. Average Fixed Costs fixed costs as it relates to total productionfc divided by total productionfc/total production TP MPP FC AFC0 0 0 35 1 6 6 35 35/ 6=5.82 15 9 35 35/15=2.33 26 11 3535/26=1.35

  15. TP MPP FC AFC4 40 14 35 .8755 55 15 35 .6366 71 16 35 .4937 81 10 35 .4328 90 9 35 .399 96 6 35 .36510 95 -1 35 .368

  16. PART 2: What do the graphs look like? X AXIS output Y AXIS costGRAPH AVERAGE FIXED COST

  17. NOW READY TO LOOK AT THE WHEN YOU CHANGE THE FACTOR

  18. Variable Costs vc/totalproduction = avc#s TP MPP FC AFC VC AVC0 0 0 35 0 01 6 6 35 5.8 4040/6=6.72 15 9 35 2.3 40+ 40 = 80 80/15= 5.333 26 11 35 1.35 80 + 40 =120 120 /26 =4.624 40 14 35 0.875 120 +40 = 160160/40= 4

  19. TP MPP FC AFC VC AVC Variable Costs vc/total production5 55 15 35 .636 200 3.636 6 71 16 35 .493 240 3.387 81 10 35 .432 280 3.468 90 9 35 .39 320 3.569 96 6 35 .365 360 3.7510 95 -1 35 .368 400 4.21

  20. PART 2: What does this graph look like? avc

  21. NOW WE WILL LOOK AT TOTAL COSTSTC= FC+ VC

  22. AND THEN TC/ TPaverage total costfc plus vc/ production tc/tp

  23. # TP MPP FC AFC VC AVC TC ATC0 0 0 35 ----- 0 0 35 ----1 6 6 35 5.8 40 6.7 35+40=75 75/6=12.52 15 9 35 2.3 80 5.3335 +80=115115/15=7.663 26 11 35 1.35 120 4.62 35+120=155155/26=5.97

  24. TP MPP FC AFC VC AVC TC ATC4 40 14 35 .875 160 4 1954.8755 55 15 35 .636 200 3.6362354.276 71 16 35 .493 240 3.382753.873

  25. TP MPP FC AFC VC AVC TC ATC7 81 10 35 .432 280 3.46 315 3.89**note it is now rising--diminishing returns 8 90 9 35 .39 320 3.56355 3.959 96 6 35 .365 360 3.75395 4.11510 95 -1 35 .368 400 4.21 4354.578

  26. PART 2: What do the graphs look like? TCATC

  27. NOW: WHAT IS THE COST OF PRODUCING ONE MORE UNITchange cost /change in productionvc/mpp go to mpp column and divide that into vcMarginal Costs of producingone more

  28. TP MPP FC AFC VC AVC TC ATC MC0 0 0 35 ----- 0 0 35 ---- -----1 6 6 35 5.8 40 6.7 75 12.5 40/6= 6.672 15 9 35 2.3 80 5.33 115 7.66 40/9= 4.443 26 11 35 1.35 120 4.62 155 5.97 40/11= 3.64

  29. TP MPP FC AFC VC AVC TC ATC MC4 40 14 35 .875 160 4 195 4.875 2.865 55 15 35 .636 200 3.636 235 4.27 2.666 71 16 35 .493 240 3.38 275 3.873 2.57 81 10 35 .432 280 3.46 315 3.89 48 90 9 35 .39 320 3.56 355 3.95 4.44 9 96 6 35 .365 360 3.75 395 4.115 6.610 95 -1 35 .368 400 4.21 435 4.578

  30. WHAT ABOUT REVENUE AND PROFIT

  31. Total revenue= Price X quantity soldhow can you figure this out

  32. Marginal RevenueChange in revenueHow could we figure this??Mpp/Change in revenuewhat would be the easy way ???

  33. Profit • Difference between total revenue and total costs • Remember we want Max Profit • What equation expresses where Max Profit is located

  34. Max Profit output is always found at MR=MC

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