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1、Technologyand7ProductionLearningObjectivesAfterreadingthischapter,studentsshouldbeableto:}Explainhowtoidentifya?rm’se?cientproductionmethods.}Calculateaverageproductandmarginalproductandexplainhowtheymeasurea?rm’sproductivity.}Discussinputsubstitutioninproductionwithtwovari
2、ableinputs.}Understandtheconceptofreturnstoscaleanditscauses.}Discussthesourcesofproductivitydi?erencesacross?rmsandovertime.nJanuary1907,HenryFordwaspreparingtointroducetheModelT,thecarthatwouldIchangeautomobilehistory.Atthattime,theautomobilewasanexcitingnewproductthatman
3、yentrepreneursweretryingtodevelopandsell.Yetfewindividualscouldaffordtobuyone.Carswereassembledbysmallnumbersofworkersusingcustom-?ttedparts;thehighcostofproductionmadethemaproductonlyforthewealthy.ForddreamedofchangingthatwiththeModelTbutfacedanumberofcrucialques-tions.How
4、shouldheproducetheModelT?Wastheproductionmethodhiscompetitorsusedtherightchoice?Couldheemploymachinesoruselabormoreeffectivelytolowerthecostofproductionandexpandsales?Fordsnovelanswerstothesequestionsrevolu-tionizedtheautomobileindustry,makinghimarichman.In1917,1.7millionca
5、rsweresoldintheUnitedStates,upfromonly43,000in1906.Nearly50percentwereFords.Inafreemarketeconomy,mostgoodsareproducedby?rms—privatelyownedcompa-nieswhoseownerskeepthepro?tsgeneratedbythesaleoftheirproducts.Inthischapter,209ber00279_c07_209-248.indd209CONFIRMINGPAGES10/10/07
6、9:21:02AM210PartIIEconomicDecisionMakingwellbeginourdiscussionof?rmsproductiondecisionsbyexaminingwhat?rmsareabletoproduceandhowtheycanproduceit.1Wellcover?vetopics:1.Productiontechnologies.Firmscanusemanydifferentmethodstomaketheirproducts.A?rmsownerormanagershouldfocusont
7、heonesthatareef?cient,inthesensethattheygetthemostoutputpossiblefromthe?rmsavailableinputs.Wellseehowtodescribea?rmsef?cientproductionmethods.2.Productionwithonevariableinput.Intheshort-run,a?rmmaynotbeabletoadjustitsuseofmanyofitsinputs.Welldiscussthesimplestcaseofshort-ru
8、nproduction,inwhichthe?rmhasasingleinputwhoseuseitcanvary.Welldiscusstwokeymeasure
