24. Factors of production of the firm. The production function of the firm. The law of diminishing productivity of factors of production.
Production is the basis of the business activity of the company. After all, income is a realized product or service. Commercial activity is preceded by industrial activity.
Production is the process of creating goods necessary for consumers: material and intangible goods (services). In this case, firms use factors of production, which are also called input (input) production factors.
The factors of production used by the firm are divided into constants and variables. Fixed factors of production are those whose quantity remains unchanged during the production of a given product (for example, machine tools in the production of a given batch of shoes). Variable factors of production - those factors, the amount of which changes during the production of a given product (for example, electricity, raw materials).
For example, the owner of a candy store uses such inputs as the labor of confectioners and sales assistants, raw materials in the form of flour, sugar, yeast, as well as capital represented by mixers, ovens, baking dishes, etc.
The factors of production are usually divided into three main categories: labor, capital, materials.
Labor as a production factor includes skilled and unskilled labor, as well as entrepreneurial activity.
The relationship between the input factors and the final product output is described production function. It is the starting point in the microeconomic calculations of the company, allows you to find the best option for using production capabilities.
Law of diminishing marginal productivity
Suppose that F 1 is a variable factor, while the other factors are constant:
Total product (Q) is the amount of an economic good produced using some amount of a variable factor. Dividing the total product by the amount of the variable factor consumed, we obtain average product (AR).
Marginal Product (MP) is defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
Factor substitution rule: the ratio of the increments of the two factors is inversely related to the magnitude of their marginal products.
Law of diminishing marginal productivity States that With an increase in the use of any factor of production (while the rest remain unchanged), sooner or later a point is reached at which the additional use of a variable factor leads to a decrease in the relative and further absolute volumes of output.
The resource use rule can be expressed as MRP = MRC, where MRP is the marginal product in monetary terms and MRC is the marginal cost.
25. Production grid and isoquant. Isocost.
Q = f(K, L), where To- capital, L- labor.
Production grid (Q=F(L,K))
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Capital cost (K) |
Labor cost (L) |
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The production grid shows that the same amount of output can be produced with different combinations of factors of production. For example, Q=85 units can be produced with a combination of factors 200K and 30L and with a combination of 100K and 60L.
If we connect all combinations of resources, the use of which provides the same amount of output, we get isoquants.
Isoquanta is a curve that reflects the various combinations of resources that can be used to produce the same amount of output.
Isoquants for the production process mean the same as indifference curves for the consumption process. They have similar properties: 1. have a negative slope, 2. are convex relative to the origin, 3. do not intersect with each other, 4. isoquant, lying above and to the right of the other, represents a larger volume of output, 5. show real levels of production: 10 thousand, 20 thousand, 30 thousand, etc. 
The concave shape of the isoquant shows that the marginal rate of technological substitution decreases as one moves down the isoquant. This means that labor and capital are not absolutely interchangeable, and therefore there are certain difficulties in replacing capital with labor, i.e. there are certain limits of interchangeability of factors.
The amount of money that the company has to organize production is called the budget constraint (graphically - a straight line, isocost).
Isocost - a straight line showing all combinations of resources, the use of which requires the same cost.
, where - P To and R L - respectively, the price of a unit of capital and a unit of labor
Using the same method as in determining the equilibrium of the consumer, we combine the isovcant map with the isocost and the touch point will show largest volume production for given budgetary possibilities (Fig. 6.3 .b.).
Producer equilibrium- the state of the producer in the process of replacing one factor of production with another, when the last ruble spent on each resource brings the same marginal product. 
Mathematically, the system of equilibria is described by a system of equations. 
- a condition for optimizing production - choosing from all possible options for using resources those that give the best option. In order to see the prospects for the development of an enterprise in the long term, it is necessary to imagine how the volume of production and the cost of acquiring factors will increase at each stage of the growth in production volume. Let's connect isoquants with isocosts by points of contact, we will get the trajectory of the economic activity of the company or the production activity of the enterprise isoclinal line OK (Fig. 6.3. in)
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1. The essence of the law. With an increase in the use of factors, the total volume of production increases. However, if a number of factors are fully involved and only one variable factor increases against their background, then sooner or later there comes a moment when, despite the increase in the variable factor, the total volume of production not only does not grow, but even decreases.
The law says: an increase in the variable factor with fixed values of the rest and the invariance of technology ultimately leads to a decrease in its productivity.
2. Operation of the law. Decreasing Law ultimate performance, like other laws, operates in the form general trend and manifests itself only when the technology used is unchanged and in a short period of time.
In order to illustrate the operation of the law of diminishing marginal productivity, one should introduce the concepts:
- common product- the production of a product using a number of factors, one of which is variable, and the rest are constant;
- average product- the result of dividing the total product by the value of the variable factor;
- marginal product- increment of the total product due to the increment of the variable factor.
If the variable factor is incremented continuously by infinitesimal values, then its productivity will be expressed in the dynamics of the marginal product, and we will be able to track it on the graph (Fig. 15.1).
Rice. 15.1.Operation of the law of diminishing marginal productivity
Let's build a graph where the main line OAHSV– dynamics of the total product:
1. Divide the curve of the total product into several sections - cuts: OB, BC, CD.
2. On the segment OB, we arbitrarily take point A, at which the total product (OM) equal to variable factor (OR).
3. Connect the dots O and BUT- we will get the RAR, the angle of which from the point of coordinates of the graph will be denoted?. Attitude AR to OR– the average product, also known as tg ?.
4. Draw a tangent to point A. It will intersect the axis of the variable factor at point N. A APN will be formed, where NP- marginal product, also known as tg ?.
On the whole segment OV tg? the law of diminishing marginal productivity does not show its effect.
On the segment sun the growth of the marginal product is reduced against the background of the continuing growth of the average product. At the point FROM marginal and average product are equal to each other and both are equal?. Thus began to appear law of diminishing marginal productivity.
On the segment CD the average and marginal products are declining, and the marginal product is faster than the average. At the same time, the total product continues to grow. Here the operation of the law is fully manifested.
Behind the dot D, despite the growth of the variable factor, an absolute reduction even of the total product begins. It is difficult to find an entrepreneur who would not feel the effect of the law beyond this point.
Law of diminishing marginal productivity valid in short term and interval when one factor of production remains unchanged. The operation of the law assumes an unchanged state of technology and production technology, if in manufacturing process If the latest inventions and other technical improvements are applied, an increase in output can be achieved using the same factors of production. That is, technological progress can change the boundaries of the law.
If a capital is a fixed factor, and work- variable, then the firm can increase production by using more labor resources. But according to the law of diminishing marginal productivity, a consistent increase in a variable resource, while the others remain unchanged, leads to diminishing returns of this factor, that is, to a decrease in the marginal product or marginal productivity of labor. If the hiring of workers continues, then in the end, they will interfere with each other (marginal productivity will become negative) and output will decrease.
Marginal productivity of labor(marginal product of labor - MPL) is the increase in output from each subsequent unit of labor i.e. productivity gain to total product (TPL). The marginal product of capital MPK is defined similarly.
The law of diminishing marginal productivity “states that with an increase in the use of any factor of production (while the others remain unchanged), sooner or later a point is reached at which the additional use of a variable factor leads to a decrease in the relative and further absolute volumes of output. An increase in the use of one of the factors (with the rest fixed) leads to a consistent decrease in the return of its application.
The law of diminishing marginal productivity has never been proven strictly theoretically, it is derived experimentally. If we assume that the law will not be fulfilled, then, for example, it is possible, for example, on a limited plot of land, by increasing the amount of fertilizer, to obtain food for the whole world. This, of course, is not realistic.
The law of diminishing returns begins its operation from the second stage of production, when marginal productivity begins to fall. The level from which the decrease in marginal productivity begins depends on the nature of the production function.
29. The choice of production technology. Isoquant. Marginal rate of technological substitution.
Suppose that only 2 resources are used in production, for example, labor (L) and capital (K) (Figure 5.2). If we connect all combinations of resources, the use of which will provide the same amount of output, then we get isoquants.
An isoquant, or constant product curve, is a curve representing an infinite number of combinations of factors of production that provide the same output.
An isoquant lying above and to the right of another represents a larger volume of output. The set of isoquants, each of which shows the maximum output achieved by using certain combinations of resources, is called an isoquant map.
The marginal rate of technical substitution or technological replacement (MRTS) is the amount of one resource that can be reduced in exchange for a unit of another resource while maintaining the same total output.
The slope of the isoquant measures the marginal rate of technological substitution. The marginal rate of technological substitution shows how much capital can be replaced by one additional unit of labor, provided that output remains unchanged.
30. The rule of cost minimization. Isocost. Producer balance.
The cost minimization rule is as follows: the cost of producing a certain volume of output becomes minimal if the ratio of the marginal product of one factor of production to its price is equal to the ratio of the marginal product of another factor of production to its price: MP 1 /P 1 = MP 2 /P 2, where 1 and 2 are factors of production.
Isocost is a set of points in the plane, each of which corresponds to a set of certain volumes of two factors of production (for example, K - capital and L - labor), acquiring which the entrepreneur will spend the same amount of money.
An isocost map is a graph that shows isocosts corresponding to different levels of an entrepreneur's costs of factors of production.
Using the isocost, it is possible to determine which set of factors of production provides a given output with the lowest total cost (TC). The solution to this problem is at the point of contact (ε) of the isocost with the isoquant, which reflects the equilibrium of the producer.
For a given level of costs, all possible combinations of factors of production must lie on the isocost; at the same time, its slope will reflect the ratio of factor prices (P L /P K). All technologically effective combinations of factors will lie on an isoquant, the slope at each point of which expresses the ratio of marginal factor productivity (MP L /MP K). The optimization condition (MP L /MP K = P L /P K) will be satisfied if the slopes of the isocost and isoquant are equal.
Therefore, the optimum will be reached at the point A of contact between the isoquant and the isocost. For the isoquant, this is the point of replacement of factors of production, expressed in terms of the ratio of their marginal products, for the isocost, the point of replacement of factors of production, expressed in terms of the ratio of their prices.
The minimum production costs are achieved under the condition that the ratio of the marginal productivity of production factors is equal to the ratio of their prices. The condition for minimizing production costs is at the same time the condition under which the equilibrium of the producer is reached, since there is no other combination of factors that can ensure greater production efficiency.
31. Production costs and their classification.
To carry out its activities, the firm incurs certain costs associated with the acquisition of the necessary production factors and the sale of manufactured products. The valuation of these costs is the costs of the firm.
Production costs are the costs of production, expressed in terms of value, associated with the rejection of alternative uses of resources. Production costs - the total cost of living and materialized (past) labor for the production of a product, commodity, service in monetary terms
The principle of alternativeness in determining production costs shows that the actual level of costs should be estimated at the current cost of the resource and taking into account lost profits.
Production costs:
Accounting costs - actual costs incurred in cash associated with the implementation of production (only payments and accruals that must be taken into account in accordance with legal acts on accounting.)
Economic costs - alternative the cost of resources diverted from this production. (explicit, implicit costs)
The costs are:
external ( explicit) - resources purchased by the firm (accounting costs);
Explicit costs- the amount of payments for acquired factors (wages of hired workers, payments to suppliers of material resources, payments on bank loans, payment for transport, energy, etc.).
domestic(implicit, or implicit) - the company's own resources (not reflected in the financial statements).
Implicit costs- this is the cost of services of factors of production that are used in the production process, but are not purchased (for example, belonged to the owner of the firm). Their value is cash flow, which could be obtained with the best alternative use. They are difficult to account for in contracts and are rarely fully valued in cash.
All these costs are usually returnable and taken into account when making economic decisions along with economic (opportunity) costs.
Return costs are the costs that the firm may not incur by terminating its activities.
Only one category of costs is not taken into account when making important decisions for the firm on the scale of activities - irrevocable. sunk costs associated with previously committed and irrecoverable expenses at the time of closing the company. These include the cost of creating highly specialized equipment, advertising costs, etc.
32. Dynamics of production costs in the short run.
The short run is the period when most of the production remains constant, fixed, and in order to increase (or decrease) the volume of production, the firm can change only one factor of production.
In the long run, the firm can make changes to all factors of production. She can not only hire additional workers but also to build or purchase additional premises and equipment that meet the new market conditions.
In the dynamics of costs in the short term, the following can be distinguished:
- 1. simultaneous reduction of marginal, average variable and total costs;
- 2. decrease in average variables and total averages with an increase in marginal costs;
- 3. increase in marginal and average variables with a decrease in average total costs;
- 4. simultaneous increase in all types of costs.
33. Production costs in the long run.
The long-term production period is the time interval during which the enterprise can change the number of all employed resources, including the number production capacity. From an industry point of view, in the long run, there is movement not only within firms to expand or curtail output, but also movement within the industry: some firms leave it, completely curtailing production, and some newly formed ones may come.
In the long run, all factors of production can be changed, and accordingly there will be no division into fixed and variable costs, and only average and marginal costs will be considered. According to its content, long-term production costs reflect changes in costs depending on changes in the scale of production. The nature of these changes will be determined by the type of scale (assuming the prices of factors of production remain unchanged): with a growing scale effect, the average long-term costs will decrease, with a constant one, they will remain unchanged, with a decreasing one, they will increase.
In the long run, the producer can choose any size of production. However, when solving the problem of optimizing production in terms of costs, he must choose such a scale of production at which output would be carried out with the minimum average long-term costs. Under this condition, the optimal size of the enterprise will be such that the equality of long-term average and marginal costs (LMC = LAC) is achieved.
Long run cost curves show the minimum cost of producing any given quantity of output when all factors are variable.
Long-run marginal cost characterizes the increase in costs with an increase in output per unit, if all production resources are variable.
Long-term average costs characterize the unit (average) costs per unit of output, provided that all production resources are variable. The main difference between long-term and short-term analysis is the measure of resource factor elasticity. In the long term, producers have opportunities that are not feasible in the short term. AT long term the manager can control the volume of output and costs, changing not only the intensity of production activity at the enterprise, but also the size and number of enterprises.
34. Income and profit of the firm.
The cash income that the firm receives as a result of the sale of manufactured products takes the form of total (cumulative) income (TR), the value of which depends on the market price (P) of the goods sold and the amount of products sold by the firm (Q), i.e. TR = P *Q.
Income can be analyzed both from the standpoint of changes in its total value, and from the standpoint of assessing the profitability of products, as well as the nature of its changes. For this purpose, the indicators of average and marginal income are used. Average income (AR) - the amount of income per unit of product sold, i.e. AR= TR/Q. Marginal income (MR) - the increase in total income from an additional unit of output sold, i.e. MR=ΔTR/ΔQ.
The firm's profit is formed as the difference between total income and total costs, and its changes are described by the function n(q) = TR(q) - TC(q).
Accounting profit is the difference between total revenue and accounting costs, which are actually payments made for the resources involved in the production of goods.
Economic profit is defined as the difference between total revenue and economic costs.
There are two approaches to profit maximization analysis. One of them is based on comparison absolute values income and costs, the other - on marginal analysis and consists in comparing marginal income and marginal costs.
The comparison of total revenue and total costs is based on the fact that the maximum amount of economic profit will be obtained when an additionally sold unit of production does not give an increase in profit. The amount of profit is the difference between total revenue and total production costs, the values of which are functionally dependent on the produced and sold quantity of products.
The maximum profit is achieved at the volume q 2 , where the difference between the values of total income and total production costs is the largest (BC). At this level of output, the slope of the total cost curve (point C) is equal to the slope of the total income curve (point B).
The firm maximizes profit at the level of output at which total revenue exceeds total cost of production by the greatest amount.
The comparison of marginal revenue and marginal cost is an example of marginal analysis and relies on the comparison of marginal benefits (MR) and marginal cost (MC) as a principle of maximization.
The principle of maximization says that in order to achieve maximum profit, the firm must choose the level of output at which the values of marginal revenue and marginal cost are equal.
35. State regulation of the economy, its forms and methods.
State regulation- a set of measures, actions applied by the state for corrections and the establishment of basic economic processes.
The state is responsible for:
- Fiscal policy (budget, taxes)
- Monetary policy (cash, credit market regulation)
- Regulation of foreign trade
- Regulation of income distribution
Mechanisms state regulation market economy:
- Fiscal (fiscal) policy is the activity of the state in the field of taxation, regulation of public spending and the state budget. Aimed at providing sustainable development economy, preventing inflation and providing employment for the population.
- Monetary (monetary) policy - control over the money supply in the economy. Its goal is to support the stable development of the economy.
Regulation methods are divided into:
- Direct: control over monopolies, ecology, development of standards, their maintenance (quality marks, state standards)
- Indirect: monetary policy, income control, social policy
- Foreign economic regulation
Forms of regulation
- State targeted programs(social)
- Forecasting
- Situation modeling
State regulation also extends to the technical aspects of activity. This is the so-called "technical regulation". This regulation has common "centralized mechanisms" that are also characteristic of economic regulation: regulation, certification and supervision, licensing, accreditation, delegation, registration, sanctions and appeals.
Reasons for regulation: 1) The presence of public goods in the country (education, healthcare, environmental protection, etc.) 2) The presence of private and public nature of production 3) The emergence of negative effects within the market (poverty, crime, environmental problems) 4) Scientific and technological progress 5) The trend towards monopolization 6) The presence of international competition.
36. National economy. National accounting system.
« National economy- this is a system of social reproduction of the country that has historically developed within certain territorial boundaries, an interconnected system of industries and types of production, covering all the established forms of social labor.
The ultimate overall goal of the national economy is to provide conditions for the optimal life of all members of society on the basis of economic growth.
This common goal integrates from a number of more specific goals:
Stable high growth rates of national output
Efficient production
Stability
High Employment Rate, Efficient Employment
maintenance foreign trade balance achievement of social justice in the division of society's income.
The basis of the national economy is enterprises, firms, organizations, households, united into a single system by economic relations, performing certain functions in the social division of labor, producing goods and services.
The national economy consists of two major areas: the production of goods ( material production) and provision of services.
System of National Accounts is a balance of interrelated indicators characterizing the production, distribution, redistribution and final use of the final product and national income. At the heart of building a system of national accounting (SNA) is the concept of "economic circulation", the core of which is the economic turnover.
37. Main macroeconomic indicators. Definition of GDP, ways to measure it.
Main macroeconomic indicators:
GDP (gross domestic product) - measures the value of the final product produced in the territory of a given country for a certain period, regardless of whether the factors of production are owned by citizens of this country or owned by foreigners.
GNP (gross national product) - reflects the ownership of the produced product of the nation and differs from GDP by the amount of net factor income from abroad (YF):
GNP=GDP + YF.
Three main methods are used to calculate GDP:
In order to reflect the influence of a variable factor on production, the concepts of total (general), average and marginal product are introduced. These are natural indicators that are measured in units such as: pieces, meters, kilograms, etc.
Total Product (TP) is the amount of an economic good produced using some amount of a variable factor. Usually in the short run, the variable factor is labor (L), i.e. the number of workers employed in the production process. Capital (K) is considered a constant (unchanging) factor.
By dividing the total product by the amount of the variable factor consumed, one obtains average product (AR):
AP = TP / L
The average product shows how many products (in pieces, kilograms, etc.) one worker produces on average.
marginal product (marginal product) usually defined as the increase in total product resulting from infinitesimal increments in the amount of variable factor used:
MP = DTP/DL
Marginal product measures how many additional units of output an additional employee produces.
The total product (TP) with the growth of the use of the variable factor (L) in production will increase, however, this growth has certain limits within the given technology. Since the same amount of capital will account for more and more units of labor (number of workers), the return on each subsequent worker will sooner or later begin to decline, and accordingly the increase in the total product will also begin to decrease.
Law of diminishing marginal productivity argues that with the growth in the use of any production factor(if the others remain unchanged), sooner or later a point is reached at which the additional application of a variable factor leads to a decrease in the relative and further absolute volumes of output. An increase in the use of one of the factors (while the others are fixed) leads to a consistent decrease in the return on its use.
Law of diminishing productivity has never been proven strictly theoretically, it is derived experimentally (first in agriculture, and then applied to other branches of production). It reflects the actually observed fact of certain proportions between different factors. Violation of them, expressed in an excessive growth in the use of one of the resources, can quite quickly exhaust the boundaries of the interchangeability of resources and ultimately lead to insufficiently efficient use of it (if other factors of production remain unchanged).
Law diminishing marginal productivity is not absolute, but relative.
Firstly, it is applicable only for a short period of time, when at least one of the factors of production remains unchanged.
Secondly, technological progress is constantly pushing its boundaries.
21. THE CONCEPT OF PRODUCTION COSTS AND THEIR TYPES: FIXED, VARIABLE, GENERAL, AVERAGE, MARGINAL COSTS.
production costs are monetary expressions of the costs of factors of production associated with the release of products and services by the firm.
fixed costs(fixed cost)– These are costs whose value in the short run does not change with an increase or decrease in output. They are designated FC.
Fixed costs include costs associated with the use of buildings and structures, machinery and production equipment, rent, overhaul, as well as administrative expenses.
variable costs(variable cost)- These are costs, the value of which varies depending on the increase or decrease in the volume of production.
Variable costs include the cost of raw materials, electricity, auxiliary materials, labor costs. They are designated VC.
Unlike fixed costs, which are independent of changes in production, variable costs increase or decrease in proportion to output.
General costs (total cost)- a set of constants and variable costs firms in connection with the production of products in the short run. They are denoted by TC or C. Total costs are a function of the output (Q): TC = f(Q).
The part of the costs that does not change with the increase or decrease in production is called fixed costs, the other part, which depends on the size of production, is called variable. The total costs are their sum:
where FC (Fixed Cost) - fixed costs;
VC (Variable Cost) - variable costs.
Since fixed costs do not change as output increases, average fixed costs represent an ever smaller and smaller amount per unit of products. Average fixed costs are denoted by AFC (Average Fixed Cost):
where Q is the volume of production.
Average variable costs AVC (Average Variable Cost) are determined by dividing variable costs by the volume of production Q:
They reach their minimum when the technologically optimal size of the enterprise is reached.
Average total cost can be obtained by dividing the total cost by the number of products produced:
or by adding average fixed costs (AFC) and average variable costs (AVC):
ATC \u003d AFC + AVC \u003d (FC + VC) / Q.
marginal cost (marginal cost)- is the increase in total costs caused by an infinitesimal increase in production.
Marginal cost is usually understood as the cost of producing last unit of production:
MC = dTC/dQ = dVC/dQ
The definition of MC is very important for the firm, because it allows you to determine those costs, the value of which it can always control. Marginal cost shows the amount of those costs that the firm will incur if it increases production by the last unit of output, or the money that it saves if it reduces production by that unit.
22. NATIONAL ECONOMY:
MAIN OBJECTS, SUBJECTS AND GOALS
National economy- this is an integral system of relationships between economic entities regarding the production, distribution and use of the national product. The national economy has difficult with structure, which can be considered from the point of view of the criteria:
1. Reproductive structure. The criterion for its selection is the features of management and functions subjects macroeconomics: households, business and the state. They are the elements of the reproductive structure.
2. social structure . Here structural elements combined according to the criteria various forms property, types of labor and income, groups of enterprises.
3. Industry structure. It is allocated according to the criterion of homogeneity of the performed production functions, manufactured products, services and other results.
4. Territorial structure . It is allocated according to the criterion of distribution of productive forces.
5. Infrastructure. It is allocated according to the criterion of the features of servicing a particular production.
6. Structure foreign economic relations . It is allocated according to the criterion of interaction between subjects of one or several countries.
Goals of macroeconomics:
1. The main and defining goal - the economic growth. The more goods and services will be produced in the economy, the higher the standard of living of the population.
2. Economic efficiency is the second goal of macroeconomics. Given that the resources of any national economy are limited, they should be used efficiently. Efficient production develops with minimal costs and losses.
3. About care high level employment. If employment is maintained at a natural rate, this means that there is full employment.
4. C stable price level, meaning the absence of sharp jumps in its dynamics.
5. Maintaining an equilibrium foreign trade balance(balance between exports and imports). This balance ensures a stable exchange rate of the national currency.
6. economic freedom, which is determined by three main questions: what, how and for whom to produce. Economic freedom does not mean that it has no boundaries, although they are flexible.
7. Equitable distribution of income. The goal of an equitable distribution of income is to ensure that no group of the population remains in extreme poverty. It is important to avoid both excessive differentiation in living standards and equalization.
8. The task becomes more and more urgent maintaining a balance of interaction with environment . Production should be carried out on the basis of resource-saving, nature-protective, waste-free technological systems. This goal is important not only for national economies, but is a global problem.
9. Increase free time as the basis for the harmonious development of the individual. Free time- one of the generalizing indicators of the country's standard of living, the volume of the needs of the population, since the amount and structure of free time reflects all the moments associated with the material well-being and cultural level of people.
