Econ 240 1st Edition Lecture 10Outline of Last Lecture I. Production and Cost a. Economic cost and Profit a.i. The Firms Costs a.i.1. Explicit Costa.i.2. Implicit Costa.i.2.a. Economic depreciationa.i.2.b. Opportunity costa.ii. Firm's Goal: To maximize profit Outline of Current Lecture II. Factors of Production III. The Short RunIV. The Long Run V. Short Run Production a. Total Product (TP or Q))b. Average Product (AP)c. Marginal ProductVI. Increasing Marginal ReturnsVII. Decreasing Marginal Returns Current LectureFactors of Production- A Firm's produces OUTPUT (goods or services) using some INPUTS (factors of production):1. Capital2. Labor3. Land/Natural resources4. EntrepreneurshipThe Short RunThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Any period of time in which the firm cannot change the quantities of some inputs (called fixed inputs) and can only change the quantities of some inputs (called variable inputs).The Long Run- Any period of time in which the firm can change the quantities of all inputs Short – Run Production - In the short run, usually firms can change quantity of labor but not the quantity of capital - If labor is the only variable input, then to increase output, a firm increases the quantity of labor it uses - Total product (TP or Q) The total quantity of a good produced in a given period of time  Total production usually increases when the quantity of labor employed increases - Average Product (AP) The total product per worker employed  It is calculated as: Average Product of Labor = total/ labor  Another name for average product is productivity - Marginal Product  The change in total product due to one – unit increases in quantity of labor employed Marginal Product of Labor = Change in Total Product/ Change in Labor Tells us the contribution of one more worker to total productionIncreasing Marginal Returns - Each additional workers provides more additional output than the previous worker did- Usually occurs when a small number of workers are employed 2- Additional workers are hired specialization becomes possibleDecreasing Marginal Returns - Each additional worker provides less additional output than the previous worker did- This usually occurs when a small number of workers are employed - Congestion decreases the output of additional worker - Decreasing marginal returns are very common  The law of decreasing returns ▪ As a firm uses more of a variable input (without changing the quantity of fixed inputs), the marginal product of variable input eventually