ECON 211 Lecture Notes - Lecture 6: Diminishing Returns, Factors Of Production, Marginal Product
Document Summary
Theory of the irm explanaion of how a irm makes cost-minimizing producion decisions and how its cost varies with its output. The producion decisions of irms are analogous to the purchasing decisions of consumers, and can likewise be understood in three steps: producion technology, cost constraints. Firms ofer a means of coordinaion that is extremely important and would be sorely missing if workers operated independently. Firms eliminate the need for every worker to negoiate every task that he or she will perform, and bargain over the fees that will be paid for those tasks. Factors of producion inputs into the producion process (eg. labor, capital, and materials) We can divide inputs into the broad categories of labor, materials and capital, each of which might include more narrow subdivisions. Labor inputs include skilled workers (carpenters, engineers) and unskilled workers (agricultural workers), as well as the entrepreneurial eforts of the irm"s managers.
