Mind Map Gallery Production and Cost

Production and Cost

This is a mind map about production and cost. Production doesn't mean to be necessarily manufacturing but can be combining inputs to obtain goods of services. To discuss production and cost, we need to separate them into long-run costs and short-run costs. Also, the marginal product of labor and marginal cost should be paid attention to. If you are interested in it, please check the mind map shown above. You can discover various templates on EdrawMind and create a colorful mind map for your business.

Edited at 2021-09-22 17:08:19

Jagadkg 96

Production and Cost

Jagadkg 96

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Outline

Production and cost

Production

Not Necesarily Manufacturing there is also services

Combining inputs to obtain goods of services

Resources

Capital

Physical

Human

Land

Entrepreneurship

Focus most on these

Cost most of production

Other inputs

Electricity

ransportation

Raw materials

Internet

Time Horizons

Long Run

Long enough to adjust quanity of inputs

All inputs are variable

Short Run

Variable Inputs

Quantity can be adjusted

Fixed Inputs

Quantity can be adjusted

At least one input for which cannpt adjust quantity

at least one is a fixed variable

EX: Spotless Car Wash

Produce

Service

Wash Car

Inputs

Physical Capital

Automated Car wash lines

Labor

Full time employees

Othres Inputs

Water

Electricity

Soap

These will not be focussed on

Short Run

Capital : Number of Car wash lines Fixed Variable

Labor : Workers Variable input

Quantity : Number of Cars washed a day

Graph

Marginal Product of Labor

MPL = Quantity Change / Labor Change

Marginal Returns to Labo

Increasing MRL

Increase MPL

Gains from Specialization

Decrease MRL

Decrease MPL

Less Gains from specialization

Law of Diminishing Returns

As you add more units of any input while keeping other inputs fixed Returns to this input become diminishing

Add more people to work on car wash line Eventually there is too many people working on one thing

Rises then Falls

MPL vs MC

Marginal product of labor

Low Q

MPL Rising

Each additional worker adds more units at output

Each additional unit of output requires fewer workers

High Q

MPL Falling

each additonal worker adds fewer units of output

each unit of output requires more workers

U shaped curve

Marginal Cost

Short Run Costs

Average Costs

TFC/Q AFC= Average Fixed Cost

TVC/Q AVC= Average Variable Cost

ATC= Average Total Cost

TC/Q

AFC + AVC

Long Run

Least Cost rule

Graph Example

Done by choosing best combination of variables Trying to spend the least

Plant

Combinations of long run variables Set Fixed inpu

Plant size

Plant set at a given size Short Run

Can adjust the size of plant Long Run