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Economic Category: Production and Firm Behavior

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Production and Firm Behavior - Article

1. A Beginner's Guide to Elasticity

Including discussion on price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross-price elasticity. [Details...]

2. Comparative Advantage

Introduces David Ricardo's principle of comparative advantage. B means of example, shows how specialization and trade result in more output. [Details...]

3. How to Understand and Calculate Cost Measures

Discussion on marginal costs, total costs, fixed costs, total variable costs, average total costs, average fixed costs, and average variable costs. [Details...]

4. Market Equilibrium

Article on the basics of market equilibrium. [Details...]

5. Microeconomics - Elasticity Overview

An overview of the concepts of elasticity, with links to more specific explanations of the various elasticities. [Details...]

6. Monopoly

A monopoly is an industry in which there is one seller. Because it is the only seller, the monopolist faces a downward-sloping demand curve, the industry demand curve. This article explains whether a monopoly is desirable or not. [Details...]

7. Production - The Cowles Contributions

Here we shall consider the Neo-Walrasian theory of production developed by Tjalling C. Koopmans (1951) among others at the Cowles Commission during the 1940s and 1950s which relies heavily on use of activity analysis and convexity theory, notably the Separating Hyperplane Theorem. The more traditional Neoclassical theory of production is surveyed elsewhere. [Details...]

8. Production Possibilities

This in depth description of production possibilities gives a detailed account of what happens to the graphs and explains the shifts that occur. [Details...]

9. Returns to Scale

This article covers understanding returns to scale, Euler's theorem, homogeneity and hometheticity, and the intensive production function. [Details...]

10. Supply and Demand

Describes how the price level is determined by the crossing of the supply and demand curves, and how a shift in supply or demand will influence the equilibrium price and quantity. [Details...]

11. Technology and Substitution

This article covers Leontief (fixed proportions) technology, activity analysis technology, and putty-clay technology. [Details...]

12. The Austrian Theory of Capital

This article covers Capital and Time, Jevons's Amount of Investment, Bohm-Bawerk's Average Period of Production, Wicksell's Optimal Production Period, Hayek's Disequilibrium Theory, Hicks's Flows, and Debates on Austrian Capital Theory. [Details...]

13. The Cost Function

This article covers the cost function, the derived demand for factors, factor price effects, output effects, costs and returns to scale, and factor price frontiers. [Details...]

14. The Elasticity of Substitution

This article covers measuring substitutability, elasticity of substitution under constant returns to scale, Cobb-Douglas production functions, constant elasticity of substitution (CES) production functions, and elasticities of substitution in multi-input cases. [Details...]

15. The Neoclassical Theory of Distribution

This article covers Factor Payments and the Concept of Rent, The Marginal Productivity Theory of Distribution, and Substitution and Distribution. [Details...]

16. The Opportunity Cost Doctrine

This article covers Opportunity Cost and The Austrian-Marshallian Debate. [Details...]

17. The Production Decision: A First Approach

This article covers the Paretian producer, cost minimization, output maximization and duality, and profit maximization and indeterminancy. [Details...]

18. The Production Function

This page covers the production function, marginal productivity, the law of diminishing returns, the law of variable proportions, and isoquant analysis. [Details...]

19. The Production Possibility Frontier

The example of wine and grain is used to illustrate the concept of the production possibilities frontier in table and graphical form. [Details...]

20. The Profit Function

This article covers profit maximization, the profit function, output supply and factor demand functions. [Details...]

21. The Supply Curve

This article gives a brief indroduction and description of the supply curve and provides a table and graph for demonstration. [Details...]

22. The Theory of Investment

This article covers Capital versus Investment, Irving Fisher's Theory of Investment, The Clark-Knight-Ramsey Crusonia, John Maynard Keynes's Internal Rate of Return, Jorgensen's Optimization Theory, Marginal Adjustment Costs and Tobin's q, and The Aftalion-Clark Accelerator. [Details...]

Production and Firm Behavior - Interactive Tutorial

23. A firm's Long Run average cost curve

A short description and depiction of a Long Run Average Cost Curve. [Details...]

24. Average Cost

This tutorial discusses average cost, gives some typical uses of the average cost concept, and shows the distinction between average cost and marginal cost. [Details...]

25. Comparative Advantage

The linear production possibilities frontier is shown to be a restraint/constraint and, it explains scarcity and quantitatively defines opportunity cost. The model assumes there are two goods, a fixed resource endowment and a known level of technological expertise in production. [Details...]

26. Cost Concepts

This tutorial introduces economics concepts of total cost, fixed cost, variable cost, and marginal cost. [Details...]

27. Cost Concepts

This tutorial introduces economics concepts of total cost, fixed cost, variable cost, and marginal cost. Firms use these cost concepts for pricing and output decisions. These concepts form the basis for much of cost accounting. [Details...]

28. Cost Function

Click on a point on the total cost function to see more about how to visualize and quantify unit costs (AC and MC) from the total cost function. [Details...]

29. Cost Functions

Click on Lesson 2. This site explains Average fixed costs and average variable costs through graphical illustrations and movies showing the transformations.This tutorial is designed to teach about a very important part of Principles of Microeconomics, the cost functions! These functions are designed to help students understand the costs of production from different perspectives:; cost per unit versus total cost; explicit vs. implicit cost; deriving fixed, variable and total cost per unit; deriving average fixed, average variable and average total cost per unit; understanding and creating graphs for all the cost curves. [Details...]

30. Economics General - Firms

Resources on firm theory and behavior, ranging from tutorials to sample questions and presentations. [Details...]

31. Economics General - Market failure

Extensive resources, from tutorials, to case studies, to worksheets, dealing with market failure, especially from a development perspective. [Details...]

32. Economics General - Markets

Listing of topics on demand, supply, prices, and markets, with available resources ranging from tutorials, articles, and case studies, to worksheets and sample problems. [Details...]

33. Lemonade Stand

This applet allows you to control all aspects of your Lemonade Stand, from pricing, to quality control, to purchasing your necessary inventory, all while dealing with unpredictable weather, picky customers, and inventory wastes. [Details...]

34. Marginal Cost and the Output Rate Under Competition

This tutorial shows how, in theory, a business firm in a competitive industry can use the marginal cost concept developed in the previous tutorial to decide how much to produce and sell. [Details...]

35. Marginal Cost and the Output Rate Under Competition

[Details...]

36. Production Possibilities and Opportunity Cost

Explains the concept of opportunity cost through a graph of production possibilities. You are able to use various examples to create a graph of your own. [Details...]

37. Tutorial on Long-Run Production

Introductory discussion on long run production with interactive tutorials. [Details...]

38. Tutorial on Production Possibility Frontier

This page describes the concept of production possibility frontiers with interactive tutorials. [Details...]

39. Tutorial: A Producer Optimum

[Details...]

40. Tutorial: Production Possibilities and the Opportunity Cost

Interactive tutorial on how changes in production conditions or opportunity costs shift the Production Possibility Frontier. [Details...]

41. Tutorial:Profit Maximisation

Discussion of the problem of Profit maximisation with interactive tutorials. [Details...]

Production and Firm Behavior - Web Site

42. Enterprise Restructuring in the former Soviet Union

Citizens of the countries of the former Soviet Union (FSU) have recognized the potential benefits, observed in many different cultures and societies around the world, of private, market-driven enterprises. For more than half a century enterprises in the FSU have been subject to comprehensive state ownership and central planning. Prices and financing were typically of little concern to enterprise management, while workers did not have to worry about job security and received a wide range of social benefits through enterprises. While moving toward private, market-driven enterprises offers great promise for an improved standard of living for the average person, such a transition represents a fundamental social, psychological, and economic challenge. [Details...]

43. Unemployment in Eastern and Central Europe

Unemployment, once unknown and illegal in the formerly communist regimes in eastern and central Europe, has become a significant social and economic phenomenon. The rise in unemployment rates has been large but varied across countries. The transition from centrally planned economies to market-oriented economies has produced significant reductions in employment in the state sector as consumer-driven incentives begin to influence industrial structure. Reductions in employment in the state sector were partially offset by reductions in labor force particpation. Differences in the decline in labor force participation among countries led to significant differences in the relationship between unemployment growth and contraction in employment. However, the decline in labor force participation seems to be concentrated in the early stages of the transition, and in the future declining labor force participation is not likely to play as significant a role in dampening the growth of unemployment. [Details...]

Production and Firm Behavior - Online Book

44. Lecture Notes in Microeconomic Theory

This short book contains my lecture notes for the first quarter of a microeconomics course for PhD or Master's degree economics students. The lecture notes were developed over a period of almost 15 years during which I taught the course, or parts of it, at Tel Aviv, Princeton, and New York universities. [Details...]

45. Neoclassical Theories of Production

A collection of articles providing a comprehensive coverage of the theory of production. The following topics are covered: the production function, returns to scale, technology and substitution, the elasticity of substitution, the production decision, the cost function, the profit function, production in general equilibrium theory, the neoclassical theory of distribution, the opportunity costs, theory of capital and investment, and the theory of the firm. [Details...]

46. Production Economics: A Dual Approach to Theory and Applications

This online book contains links to PDF chapters dealing with issues of the theory of production. These files can be viewed in Adobe's Acrobat Reader or printed. [Details...]

Production and Firm Behavior - Non-computerized experiment

47. A Production Possibilities Frontier Experiment: Links and Smiles

In the teaching of college and advanced placement economics, some of the characteristics of the production possibility frontier (PPF) are as difficult to convey as they are important to understand. John Neral and Margaret Ray (1995) suggest a useful and instructive classroom experiment in which two products, "widgets" and "whajamas," are produced to study tradeoffs between outputs. Tearing a piece of paper in half, folding it twice, and stapling it creates a widget; folding the paper three times makes a whajama. We have designed the links and smiles experiment to incorporate one of the most challenging concepts to grasp in relation to the PPF--the specialization of inputs. Of course, it is this crucial factor that results in the increasing opportunity cost of production and the concave shape of the production frontier. [Details...]

48. A Production and Cost Experiment for Use in the Principles of Microeconomics

This paper presents a new, hands-on production and cost experiment that instructors can use in principles of microeconomics to introduce the fundamental concepts of revenues, production, and costs. The experiment provides an opportunity for the students to become directly involved in a production process (with incentives to maximize profits), and then facilitates the derivation of the production function and all of the standard short-run cost relationships based on data that the class generated. Students assimilate the theory more rapidly and comprehensively this way, allowing the instructor to cover these issues more effectively in preparation for their application in the market models. However, careful construction can also provide empirical exposure to quality control, innovations in production, specialization of labor, just-in-time delivery, etc. Several microeconomics experiments have been presented by others to explain supply and demand, collusion, scarcity, and monopoly behavior. This paper introduces a comprehensive new experiment to identify cost curves and production concepts similar to others available on this site and elsewhere, but more extensive in its coverage and flexibility. [Details...]

49. Representative Templates and Methodology for Stodder's Comparative Advantage Experiments

This experiment is designed to introduce students to the ramifications of comparative advantage theory after the completion of a discussion of the basics of production possibility analysis. Generally, a thorough discussion of both linear and concave production possibility curves is necessary to prepare the students to undertake this task. [Details...]

50. Streamlining Production Possibilities Frontier Experiments

Numerous classroom experiments involve the production of fictional goods. For example, Anderson and Chasey (1999) describe an experiment in which students produce two different products, widgets and whajamas, while Neral (1993) describes an experiment in which students produce widgets. In both of these experiments the fictional good is created with student labor and a variety of office supplies, including paper, pens or pencils, and staplers. While these experiments tend to be both entertaining and enlightening for the student participants, they are time consuming to prepare[1] and make an enormous mess! Fortunately, there is a way to maintain the educational content of these experiments without creating all the waste. [Details...]

51. Sunk Cost and Marginal Cost: An Auction Experiment

The concepts of sunk and marginal costs can be difficult to get across to students. To do so, I employ an experiment that involves auctioning dollar bills in class. I tell the students that I will be auctioning dollar bills the next class period and to bring change if they are interested in participating. I impress upon them: there is no catch, I will be auctioning off genuine U.S. one dollar bills, each bill will be sold to the highest bidder, and I will auction off at least two dollar bills--more if there is sufficient interest. [Details...]

52. Widget Production in the Classroom

For many students, the standard principles-level treatment of production and cost is an incomprehensible maze of definitions and formulas, all of which can be very difficult to relate to real world production relationships. The following classroom exercise can be helpful in bridging this gap between theory and experience. [Details...]

Production and Firm Behavior - Course lecture

53. Demand for Economic Resources

Discussion on determining resource prices, marginal physical product, marginal revenue product, and resource elasticity of demand. [Details...]

54. How Cost of Production Affects Supply

Discussion on costs, oppurtunity costs, expicit costs, implicit costs, accounting profit, economic profit, fixed costs, variable costs, marginal costs, economies of scale, and diseconomies of scale. [Details...]

55. Monopolistic Competition

Discussion on monopolistic competition including non-price competition, profit, and breakeven analysis. [Details...]

56. Monopoly

Discussion on monopoly including profit, barriers to entry, regualted monopolies, and ineffeciency. [Details...]

57. Oligopoly

Discussion on the kinked demand curve, profit, collusive pricing, price leaders, restricted oligopolies, and progressive oligopolies. [Details...]

58. Product and Factor Markets

Basic discussion on the elements of the different product markets; pure competition, monopolistic competition, oligopoly, and monopoly. [Details...]

59. Understanding Profit

Discussion on profit, marginal revenue, maximizing profit, long and short run costs, and break-even analysis. [Details...]

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