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OU ECON 1123 - Costs and Labor

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ECON 1123 1st Edition Lecture10Outline From Previous Lecture (Lecture 10)Class was canceled so no outlineOutline Lecture 11I. OutputsII. CostsLecture 10 NotesI. OutputsThe short run- A time frame in which the quantity of at least one factor of production is fixed. (some factors used by the firm are fixed in quantity. i.e. technology, buildings, capital.) in the short run. You can’t just build a new factory in aweek, or even a month.Note: other factors used by the firm vary with output (such as labor, raw materials, energy.) In the short run, to increase output the firm must increase the quantity of variable factors it uses.Fixed Factors- Cannot be changed in the short run Variable Factors- Production can be varied at any pointThe Long Run- A time frame in which the quantities of all factors of production can be varied. This means that the firm can change its plant size, as well as the quantity of all its other factors in the long run.Note: long run decisions are not easily reversedII. CostsLooking at production and costs in the short run:Total product (x), which is the maximum output that a given quantity of labor can produceMarginal Product of Labor- the income in total product that results from a one- unit increase in the quantity of labor employed with all other inputs remaining the same MPL= Change in X/ Change in laborAverage Product of Labor (APL) which equals total product divided by the quantity oflabor employed. APL= stuff/ labor (number of workers)These 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.Labor Total Output MPL APL1 30 - 30/1= 302 70 (70-30)/(2-1)=40 70/2= 353 120 (120-70)/(3-2)=50 120/3= 404 160 40 160/4=405 190 30 190/5=386 210 20 210/6= 35This will give us a graph that shows how workers initially become more productive when they are increasing but after they increase too much they can become less productive (perhaps from a loss of the space they need to work efficiently)Note: The line for the marginal will always intersect the average line at the highest point on the average lineAs a business you care about this because you want peak productivity from your


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