1. Momma Robinson's Pizzeria Where should I produce?

2. get most production @ least cost and most profit called Profit Maxization

3. Factor #of WorkersTP 00 16 215 326 440 555 671 781 890 996 1095

4. PART 2:What do the graphs look like? causeresult change factor 1 timeoutput

5. PART 1: law of diminishing returns look at app and mpp what happens ??????

6. PRODUCTION change in output as MARGINAL PHYSICAL PRODUCT OR MPP 00 16 new level of production is 6- old level mpp is 6

7. factortotal production MPP new- old level 215 15- 6= 9 3 26 26-15= 4 40 40-26= 555 6 71

8. workers production mpp 781 10 890 9 996 6

9. 1095 negative -1 Never Produce at this point

10. PART 2:What do the graphs look like? x axis= # of workers Y axis= app or mpp

11. now you see the three stages of production Increasing diminishing: define this production still increasing at a slower rate negative production: less NOT TIME PERIODS BUT WHAT IS HAPPENING TO PRODUCTION

12. COSTS Factor ProductionFixed Costs #of WorkersTPMPPFC 00 035 16 635 2 15 9 3 26 11 4 4014 5 5515 6 7116 Fixed costs do not change: will find at zero do not add them: remain the same or constant

13. TP MPPFC 78110 890 9 996 6 1095-1

14. Average Fixed Costs fixed costs as it relates to total production fc divided by total production fc/total production TPMPPFCAFC 00035 1663535/ 6=5.8 21593535/15=2.3 326113535/26=1.35

15. TPMPP FCAFC 4401435.875 5551535.636 6711635.493 78110 35.432 890 935.39 996 635.365 1095-135.368

16. PART 2:What do the graphs look like? X AXIS output Y AXIS cost GRAPH AVERAGE FIXED COST

17. NOW READY TO LOOK AT THE WHEN YOU CHANGE THE FACTOR

18. Variable Costs vc/totalproduction = avc #sTPMPPFCAFC VCAVC 00035 00 166355.8 40 40/6= 6.7 2159352.3 40+ 40 = 80 80/15= 5.33 32611351.35 80 + 40 =120 120 /26 =4.62 44014350.875 120 +40 = 160 160/40= 4

19. TPMPPFCAFCVCAVC Variable Costs vc/total production 5551535.636 2003.636 6711635.493 2403.38 7811035.432 2803.46 890 935.39 3203.56 996 635.365 3603.75 1095-135.368 4004.21

20. PART 2: What does this graph look like?avc

21. NOW WE WILL LOOK AT TOTAL COSTS TC= FC+ VC

22. AND THEN TC/ TP average total cost fc plus vc/ production tc/tp

23. #TPMPPFCAFCVCAVCTCATC 00035-----0035---- 166355.8406.7 35+40=75 75/6=12.5 2159352.3805.33 35 +80=115 115/15=7.66 32611351.351204.62 35+120=155 155/26=5.97

24. TPMPPFCAFCVCAVCTCATC 4401435.875 1604 195 4.875 5551535.6362003.636 235 4.27 6711635.4932403.38 275 3.873

25. TPMPPFCAFCVCAVC TCATC 7811035.4322803.46 315 3.89 **note it is now rising--diminishing returns 890935.393203.56355 3.95 996635.3653603.75 395 4.115 1095-135.3684004.21 435 4.578

26. PART 2: What do the graphs look like?TC ATC

27. NOW: WHAT IS THE COST OF PRODUCING ONE MORE UNIT change cost /change in production vc/mpp go to mpp column and divide that into vc Marginal Costs of producing one more

28. TPMPPFCAFCVCAVCTCATC MC 00035-----0035--------- 166355.8406.77512.5 40/6= 6.67 2159352.3805.331157.66 40/9= 4.44 32611351.351204.621555.97 40/11= 3.64

29. TPMPPFCAFCVCAVCTCATC MC 4401435.87516041954.875 2.86 5551535.6362003.6362354.27 2.66 6711635.4932403.382753.873 2.5 7811035.4322803.463153.89 4 890935.393203.563553.95 4.44 996635.3653603.753954.115 6.6 1095-135.3684004.214354.578

30. WHAT ABOUT REVENUE AND PROFIT

31. Total revenue= Price X quantity sold how can you figure this out

32. Marginal Revenue Change in revenue How could we figure this?? Mpp/Change in revenue what would be the easy way ???

33. Profit Difference between total revenue and total costs Remember we want Max Profit What equation expresses where Max Profit is located

34. Max Profit output is always found at MR=MC