Page 268 - The Principle of Economics

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PART FIVE
FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
cookies (“rise”) for each additional input of labor (“run”). That is, the slope of the production function measures the marginal product of a worker. As the number of workers increases, the marginal product declines, and the production function be- comes flatter.
OUTPUT (QUANTITY OF MARGINAL TOTAL COST OF INPUTS NUMBEROFCOOKIESPRODUCEDPRODUCTCOSTOFCOSTOF(COSTOFFACTORY+COST
WORKERS PERHOUR) OFLABOR FACTORY WORKERS OFWORKERS)
0 0 1 50 2 90 3 120 4 140 5 150
Table 13-1
50 $30 $0 $30
40 30 20 10
30 10 40 30 20 50 30 30 60 30 40 70 30 50 80
A PRODUCTION FUNCTION AND TOTAL COST: HUNGRY HELEN’S COOKIE FACTORY
Figure 13-2
Production function
HUNGRY HELEN’S PRODUCTION
FUNCTION. A production
function shows the relationship
between the number of workers
hired and the quantity of output
produced. Here the number of
workers hired (on the horizontal 130 axis) is from the first column in
Table 13-1, and the quantity of
output produced (on the vertical
axis) is from the second column.
The production function gets 90 flatter as the number of workers
increases, which reflects diminishing marginal product.
Quantity of Output (cookies per hour)
150 140
80
70
60
50
40
30
20
10
0 1
120 110 100
2 3 4
5 NumberofWorkersHired