technology and production

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1、Technologyand7ProductionLearningObjectivesAfterreadingthischapter,studentsshouldbeableto:}Explainhowtoidentifyafirm’sefficientproductionmethods.}Calculateaverageproductandmarginalproductandexplainhowtheymeasureafirm’sproductivity.}Discussinputsubstitutioninproductionwithtwovari

2、ableinputs.}Understandtheconceptofreturnstoscaleanditscauses.}Discussthesourcesofproductivitydifferencesacrossfirmsandovertime.nJanuary1907,HenryFordwaspreparingtointroducetheModelT,thecarthatwouldIchangeautomobilehistory.Atthattime,theautomobilewasanexcitingnewproductthatman

3、yentrepreneursweretryingtodevelopandsell.Yetfewindividualscouldaffordtobuyone.Carswereassembledbysmallnumbersofworkersusingcustom-fittedparts;thehighcostofproductionmadethemaproductonlyforthewealthy.ForddreamedofchangingthatwiththeModelTbutfacedanumberofcrucialques-tions.How

4、shouldheproducetheModelT?Wastheproductionmethodhiscompetitorsusedtherightchoice?Couldheemploymachinesoruselabormoreeffectivelytolowerthecostofproductionandexpandsales?Fordsnovelanswerstothesequestionsrevolu-tionizedtheautomobileindustry,makinghimarichman.In1917,1.7millionca

5、rsweresoldintheUnitedStates,upfromonly43,000in1906.Nearly50percentwereFords.Inafreemarketeconomy,mostgoodsareproducedbyfirms—privatelyownedcompa-nieswhoseownerskeeptheprofitsgeneratedbythesaleoftheirproducts.Inthischapter,209ber00279_c07_209-248.indd209CONFIRMINGPAGES10/10/07

6、9:21:02AM210PartIIEconomicDecisionMakingwellbeginourdiscussionoffirmsproductiondecisionsbyexaminingwhatfirmsareabletoproduceandhowtheycanproduceit.1Wellcoverfivetopics:1.Productiontechnologies.Firmscanusemanydifferentmethodstomaketheirproducts.Afirmsownerormanagershouldfocusont

7、heonesthatareefficient,inthesensethattheygetthemostoutputpossiblefromthefirmsavailableinputs.Wellseehowtodescribeafirmsefficientproductionmethods.2.Productionwithonevariableinput.Intheshort-run,afirmmaynotbeabletoadjustitsuseofmanyofitsinputs.Welldiscussthesimplestcaseofshort-ru

8、nproduction,inwhichthefirmhasasingleinputwhoseuseitcanvary.Welldiscusstwokeymeasure