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    Vdocuments - MX Chapter 6 Samuelson 18e

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    The document summarizes key aspects of production and business organization from the textbook. It defines production functions and key terms like total product, average product, and marginal product. It describes the law of diminishing returns and different types of returns to scale. It also discusses technological change and how it shifts the production function upward. Finally, it outlines the three main types of business organization - proprietorship, partnership, and corporation - and highlights their key characteristics and pros and cons.

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    Vdocuments - MX Chapter 6 Samuelson 18e

    Uploaded by

    javeria.malik
    6 views18 pages
    The document summarizes key aspects of production and business organization from the textbook. It defines production functions and key terms like total product, average product, and marginal product. It describes the law of diminishing returns and different types of returns to scale. It also discusses technological change and how it shifts the production function upward. Finally, it outlines the three main types of business organization - proprietorship, partnership, and corporation - and highlights their key characteristics and pros and cons.

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    Vdocuments.mx Chapter 6 Samuelson 18e

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    The document summarizes key aspects of production and business organization from the textbook. It defines production functions and key terms like total product, average product, and marginal product. It describes the law of diminishing returns and different types of returns to scale. It also discusses technological change and how it shifts the production function upward. Finally, it outlines the three main types of business organization - proprietorship, partnership, and corporation - and highlights their key characteristics and pros and cons.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    6 views18 pages

    Vdocuments - MX Chapter 6 Samuelson 18e

    Uploaded by

    javeria.malik
    The document summarizes key aspects of production and business organization from the textbook. It defines production functions and key terms like total product, average product, and marginal product. It describes the law of diminishing returns and different types of returns to scale. It also discusses technological change and how it shifts the production function upward. Finally, it outlines the three main types of business organization - proprietorship, partnership, and corporation - and highlights their key characteristics and pros and cons.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 18

    Production & Business

    Organization
    Chapter 6
    Samuelson, Nordhaus 18e
    Production & Business Organization
    ► The relationship between the quantity of output
    (such as wheat, steel, or automobiles) and the
    quantities of inputs (of labor, land, and capital) is
    called the production function.

    ► Total product is the total output produced.

    ► Average product equals total output divided by


    the total quantity of inputs.
    Chapter 6

    Marginal Product Is Derived Figure 6-1

    from Total Product


    Production & Business Organization
    ► According to the law of diminishing
    returns, the marginal product of each input
    will generally decline as the amount of that
    input increases, when all other inputs are
    held constant.
    Chapter 6

    Total Product, Marginal Product &


    Table 6-1

    Average Product
    Production & Business Organization
    ► The returns to scale reflect the impact on output
    of a balanced increase in all inputs.

    ►A technology in which doubling all inputs leads to


    an exact doubling of outputs displays constant
    returns to scale.

    ► When doubling inputs leads to less than double


    (more than double) the quantity of output, the
    situation is one of decreasing (increasing)
    returns to scale.
    Chapter 6
    Figure 6-2

    Diminishing Returns in Corn Production


    Production & Business Organization
    ► Technological change refers to a change in the
    underlying techniques of production, as occurs
    when a new product or process of production is
    invented or an old product or process is improved.
    In such situations, the same output is produced
    with fewer inputs or more output is produced with
    the same inputs.

    ► Technologicalchange shifts the production


    function upward.
    Chapter 6

    Technological Change Shifts Figure 6-3

    Production Function Upward


    Chapter 6

    Value of Networking Increases as


    Figure 6-4

    Membership Rises
    Business Organizations
    ► Businessfirms are specialized organizations
    devoted to managing the process of
    production.
    Business Organization

    ► Types of Business Organization


     There are three types of business
    organization:
     Proprietorship
     Partnership
     Corporation
    Business Organization
    ► Proprietorship
     A proprietorship is a firm with a single owner who has
    unlimited liability, or legal responsibility for all debts
    incurred by the firm—up to an amount equal to the
    entire wealth of the owner.
     The proprietor also makes management decisions and
    receives the firm’s profit.
     Profits are taxed the same as the owner’s other
    income.
    Business Organization
    ► Partnership
     A partnership is a firm with two or more owners who
    have unlimited liability.
     Partners must agree on a management structure and
    how to divide up the profits.
     Profits from partnerships are taxed as the personal
    income of the owners.
    Business Organization
    ► Corporation
     A corporation is owned by one or more stockholders
    with limited liability, which means the owners who
    have legal liability only for the initial value of their
    investment.
     The personal wealth of the stockholders is not at risk
    if the firm goes bankrupt.
     The profit of corporations is taxed twice—once as a
    corporate tax on firm profits, and then again as
    income taxes paid by stockholders receiving their
    after-tax profits distributed as dividends.
    Business Organization
    ► Pros and Cons of Different Types of Firms
     Each type of business organization has advantages
    and disadvantages.
     Table 10.4 summarizes the pros and cons of different
    types of firms.
    Read Chapter 7

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