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Copyright (c)2014 John The Production Function & Technical Efficiency Chapter Six Labor Requirements Function Labor requirements function L Example: L Q g (Q) for production function Q Chapter Six L Copyright (c)2014 John.Technically efficient: Sets of points in the production function that maximizes output given input (labor) Q f ( L, K ) Technically inefficient: Sets of points that produces less output than possible for a given set of input (labor) Q f ( L, K ) Chapter Six Copyright (c)2014 John.B Production Set L Chapter Six Copyright (c)2014 John Production Function Q = f(L) The Production Function & Technical Efficiency.Q = output K = Capital L = Labor Q f ( L, K ) The production set is a set of technically feasible combinations of inputs and outputs Chapter Six Copyright (c)2014 John The production function tells us the maximum possible output that can be attained by the firm for any given quantity of inputs The Production Function & Technical Efficiency Q D C.Inputs and Production Functions Copyright (c)2014 John Chapter Chapter Six Overview Motivation The Production Function Ø Ø Marginal and Average Products Isoquants The Marginal Rate of Technical Substitution Technical Progress Returns to Scale Some Special Functional Forms Chapter Six Copyright (c)2014 John Ø Production of Semiconductor Chips “Fabs” cost $1 to $2 billion to construct and are obsolete in to years Ø Must get fab design “right” Ø Choice: Robots or Humans? Ø Ø Copyright (c)2014 John Ø Up-front investment in robotics vs better chip yields and lower labor costs? Capital-intensive or laborintensive production process? Chapter Six Key Concepts The amount of goods and services produces by the firm is the firm’s output Production transforms a set of inputs into a set of outputs Technology determines the quantity of output that is feasible to attain for a given set of inputs Chapter Six Copyright (c)2014 John Productive resources, such as labor and capital equipment, that firms use to manufacture goods and services are called inputs or factors of production Key Concepts Production Function: This chapter presents the following content: Motivation, the production function, technical progress, returns to scale, some special functional forms. Chapter 6 - Inputs and production functions.