production schedule. production table 10-0 1-0 14-10 2-1 22-0 1-0 10-0 1-0 22-10 2-1 increasing...

$: Production Schedule. Production Table 10-0 1-0 14-10 2-1 22-0 1-0 10-0 1-0 22-10 2-1 Increasing Returns to Scale: more than \proportional increase in$
Production Schedule

# ofDoctorsper day

# ofPatientsper day

AverageProduct(Patientsper doctor)

MarginalProduct(Patientsper doctor)

MarginalRevenueProduct($/doctor)

(1) (2) (3) (4) (5)

0 0 - - -

1 10 10 10 5000

2 14 7=(14/2)

4=14-10

2-1 2000(=4x$5000)

Production Table

INPUTS 0 nurses 1 nurses 2 nurses

0 doctors 0 patients 0 patients 0 patients



10-01-0

14-102-1

22-01-0

10-01-0

22-102-1

Increasing Returns to Scale: more than\proportional increase in output relativeTo increase in inputs.200% higher output=(30-10)/10100% higher inputs (2-1)/1

Production Table for a Linear Production Function

INPUTS 0 Nurses 1 Nurses 2 Nurses 3 Nurses

0 Doctors 0 patients 5 patients 10 patients 15 patients




Equation: Patients served = 5*Doctors + 5* Nurses

Production Table for a Linear Production Function


0 Doctors 0 patients 5 patients 10 patients D 15patients

1 Doctors 5 patients 10 patients C 15patients

20 patients

2 Doctors 10 patients B 15patients

20 patients 25 patients

3 Doctors A 15patients

20 patients 25 patients 30 patients


Isoquant: how get job done: tell me the ways!

Cost Table ($200 per nurse, $600 per doctor)


0 Doctors 0 dollars 200 dollars 400 dollars 600 dollars

1 Doctors 600 dollars

800 dollars 1000 dollars

1200 dollars

2 Doctors 1200dollars 1400 dollars

1600 dollars

1800 dollars

3 Doctors 1800 dollars

2000 dollars

2200 dollars

2400 dollars


Cost Effective Choice (least cost) for isoquant of 15 patients


0 Doctors 0 patients 5 patients 10 patients 15 patients $600

1 Doctors 5 patients 10 patients 15 patients $1000

20 patients

2 Doctors 10 patients

15 patients $1400

20 patients 25 patients

3 Doctors 15 patients $1800



Cost Effective Choices for all isoquants


0 Doctors 0 patients$0

5 patients$200

10 patients$400

15 patients $600

1 Doctors 5 patients 10 patients 15 patients 20 patients$1200


15 patients 20 patients 25 patients$1800


20 patients 25 patients 30 patients$2400


Cost scheduleOUTPUT Variable Cost Average

Variable CostMarginal Cost

0

5 200 =200/5=40 40

10 400 =400/10=40 =(400-200)=40 10-5

15 600 40 40

20 1200 60 120

25 1800 72 120

30 2400 80 120

Production Table for a Min() Production Function


0 Doctors 0 patients cost effective


1 Doctors 0 patients 10 patients cost effective

A 10 patients

10 patients

2 Doctors 0 patients 10 patients 20 patients cost effective

20 patients

3 Doctors 0 patients 10 patients 20 patients 30 patients cost effective

Equation: Patients served = 10*Min(Doctors, Nurses)

Production Table for a Multiplicative Function






Equation: Patients served = 5*Doctors* Nurses

0

2

4

6

8

10

12

14

16

18

0 1 2 Nurses

Patients/Nurse

with 2 doctors

with 1 doctor

10

12

14

16

Marginal Productivity of Nurses

0

5

10

15

20

0 1 2Nurses

with 2 doctors

with 1 doctor

1012

1416

MARGINAL PRODUCT CURVES

010203040

0 1 2

TOTAL PRODUCT CURVES

with 2 doctorswith 1 doctor

Patients/Day

Nurses

14

10

22

30

Patients/nurse

SATELLITE SHORT RUN COSTSVoice Total ATC AVC MCChan- Cost ($/Vch)($/VCh)($/VCh)nels ($/mo.) 0 30,000* ---- ---- ---- 200 50,000 250 100 100 400 70,000 175 100 100 600 90,000 150 100 100 800 130,000 162 125 2001000 250,000 250 220 600*FIXED COST: Cost at ZERO output

SATELLITE SHORT RUN COST

0

100

200

300

400

500

600

700

0 200 400 600 800 1000 1200

MC

ATC

$/VOICE CHANNEL

VOICE CHANNELS

AVCShut down price

COMPETING TELECOMMUNICATIONTECHNOLOGIES: LONG RUN ATC

Voice Satel- Micro- Copper Fiber Exit Long-chan- lite wave Cable Optic run ATCnels ($/VCh)($/VCh)($/VCh)($/VCh)($/Vch)($/VCh 0 --- ---- ------ ----- 0 0 200 250 290 770 410 0 250 400 175 165 395 210 0 165 600 150 123 270 143 0 123 800 162 102 207 110 0 1021000 250 90 170 90 0 901200 ---- 92 145 77 0 771400 ---- 150 127 67 0 67

TELECOMMUNICATION AVERAGE COST

0

100

200

300

400

500

600

700

800

900

0 200 400 600 800 1000 1200 1400 1600

COPPER

FIBEROPTICMICRO-WAVE

SATELLITE

TELECOMMUNICATION AVERAGE COST

0

100

200

300

400

500

600

700

800

900

0 200 400 600 800 1000 1200 1400 1600

Copper

Fiber Optic

Microwave Satellite

LONG RUN AVERAGE COST

SOURCES OF ECONOMIES OF SCALE

* SPECIALIZATION AND DIVISION OF LABOR* INDIVISIBILITIES* DIMENSIONAL RELATIONSHIPS* MARKET SIZE AND NETWORK EXTERNALITIES* MULTIPLANT ECONOMIES* INCREASING RETURNS EXISTS

SOURCES OF DISECONOMIESOF SCALE

* PHYSICAL CONSTRAINTS

* MANAGERIAL CONTROL LOSS

* COSTS OF CENTRALIZATION

* INCREASING RETURNS EXISTS NOWHERE

CHAPTER 10: COPIER PRODUCTIONcopiers Short run Average Costs: Long Runmonth Plant #1 Plant #2 Plant #3 Plant #4 Av. Cost 0 ---- ----- ---- ---- ----- 2500 8800 9500 10000 12000 8800 5000 8000 7400 8000 9500 7400 7500 7500 6900 6700 7800 670010000 7400* 6500* 6100 6300 610012500 7800 6800 5800* 5600 560015000 8200 7300 6000 5300** 530017500 8700 7900 6400 6000 600020000 9400 8600 7600 7000 700022500 10400 9500 9000 8300 830025000 11600 10600 10400 10000 10000

copiers Short run Average Costs: Long Runmonth Plant #1 Plant #2 Plant #3 Plant #4 Av. Cost 0 ---- Minimum of Short Run Average Cost 2500 8800 9500 10000 12000 8800 5000 8000 7400 8000 9500 7400 7500 7500 6900 6700 7800 670010000 7400* 6500* 6100 6300 610012500 7800 6800 5800* 5600 560015000 8200 7300 6000 5300** 530017500 8700 7900 6400 6000 600020000 9400 8600 7600 7000 700022500 10400 9500 9000 8300 830025000 11600 10600 10400 10000 10000

EFFICIENT UTILIZATION (Short Run)

copiers Short run Average Costs: Long Runmonth Plant #1 Plant #2 Plant #3 Plant #4 Av. Cost 0 ---- Minimum of Long Run Average Cost 2500 8800 9500 10000 12000 8800 5000 8000 7400 8000 9500 7400 7500 7500 6900 6700 7800 670010000 7400* 6500* 6100 6300 610012500 7800 6800 5800* 5600 560015000 8200 7300 6000 5300** 530017500 8700 7900 6400 6000 600020000 9400 8600 7600 7000 700022500 10400 9500 9000 8300 830025000 11600 10600 10400 10000 10000

MOST EFFICIENT INVESTMENT(LR)

copiers Short run Average Costs: Long Runmonth Plant #1 Plant #2 Plant #3 Plant #4 Av. Cost 0 ---- Lowest AC at each output level. 2500 8800 9500 10000 12000 8800 5000 8000 7400 8000 9500 7400 7500 7500 6900 6700 7800 670010000 7400* 6500* 6100 6300 610012500 7800 6800 5800* 5600 560015000 8200 7300 6000 5300** 530017500 8700 7900 6400 6000 600020000 9400 8600 7600 7000 700022500 10400 9500 9000 8300 830025000 11600 10600 10400 10000 10000

TECHNICALLY EFFICIENT CHOICES

copiers Short run Average Costs: Long Runmonth Plant #1 Plant #2 Plant #3 Plant #4 Av. Cost 0 ---- Minimum of Long Run Average Cost 2500 8800 9500 10000 12000 8800 5000 8000 7400 8000 9500 7400 7500 7500 6900 6700 7800 670010000 7400* 6500* 6100 6300 610012500 7800 6800 5800* 5600 560015000 8200 7300 6000 5300** 530017500 8700 7900 6400 6000 600020000 9400 8600 7600 7000 700022500 10400 9500 9000 8300 830025000 11600 10600 10400 10000 10000

MOST EFFICIENT INVESTMENT(LR)

0

2

4

6

8

10

12

14

0 10 20 30

Copiers per month

Price ($/copier)4 COPIER PRODUCING PLANTS

LRAC

#4#3#2

#1

0

2

4

6

8

10

12

14

0 10 20 30

Copiers per month

Price ($/copier)

#4#3#2

#1

ENVELOPE OF TECHNICALLY EFFICIENT POINTS

TECHNICALEFFICIENCY

LOWEST ACAT EACH OUTPUT

0

2

4

6

8

10

12

14

0 10 20 30

Copiers per month

Price ($/copier)

#4#3#2

#1CAPACITYUTILIZATION

EFFICIENT

SHORT RUNEFFICIENCY

MINIMUM OF EACH SHORTRUN AVERAGE COST CURVE

production schedule. production table 10-0 1-0 14-10 2-1 22-0 1-0 10-0 1-0 22-10 2-1 increasing...

Documents

output slide

patientsnurse slide

cost table

production schedule

price slide

fixed cost

production table

patients equation