HAT Manifesto Part 1/3 - Rubric Cube - 250803 edit

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 5 Firm Behavior and the Organization of Industry

Chapter 13 of 36 The Costs of Production

Section 8 of 20

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Figure 2 panel (a) of is a graph of columns 1 and 2 of Table 1.

This is the production function graph and shows the relationship between

· the quantity of inputs, workers, and

· the quantity of output, cookies

One of the Ten Principles of Economics, #3: rational people think at the margin.

This idea is key to understanding the decisions a firm makes about how many workers to hire and how much output to produce.

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Column 3 of Table 1 shows the marginal product of a worker.

The marginal product of any input in the production process is the increase in the quantity of output obtained from one additional unit of input.

When the number of workers goes from 1 to 2

· cookie production increases from 50 to 90

· the marginal product of the second worker is 40 cookies

When the number of workers goes from 2 to 3

· cookie production increases from 90 to 120

· the marginal product of the third worker is 30 cookies

The marginal product is shown halfway between two rows because it represents the change in output as the number of workers changes from one amount to the next.

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production function graph

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