MGCR 293 Chapter Notes - Chapter 4: Production Function, Isoquant, Marginal Product
9 Jan 2015
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Document Summary
Once managers determine the demand for the firm"s product or service their job is far from over. Now they must choose the optimal method to produce. Managers need to be as efficient as possible. Resources are costly and using them wisely is the hallmark of managers. Efficiency requires an understanding of the production process. In business, production involves all activities associated with providing goods and services (employment, distribution ). Understanding production process is fundamental to gaining insight into cost analysis: the production function with one variable input. The production function is a table, a graph or an equation showing the maximum production output achieved from any specified set of inputs. The function summarizes the characteristics of existing technologies at a given time. If x1 is the level of the first input and x2 the level of the second input, the production function is: Q = f(x1, x2) where q is the firm"s output rate.
