THEORY OF PRODUCTION

THEORY OF PRODUCTION

A. Forms of Corporate Organization
Organization composed of various shapes and have different characteristics, including the
1. Individual companies, has the following characteristics:
                a. Capital, production and sales results are not too large
                b. Private property
2. Firm, has the following characteristics:
                a. Owned by several people
                b. Substantial capital
                c. Shared responsibility in running the company
3. Limited liability company, has the following characteristics:
                a. Large capital
                b. The shareholders own the company
4. State enterprise, has the following characteristics:
                a. In general shape of PT
                 b. Owner shares: Govt
                 c. Company's board is appointed and dismissed by the Government
5. Cooperative, has the following characteristics:
                a. Established not for profit but for the welfare of members
                b. Consists of: consumer cooperatives, production cooperatives and credit cooperatives
B. Company Goals
A company has a goal almost entirely to profit as much as possible. The way to maximize profits or earnings which are:
a. The results of total sales are more than the total cost / cost of production.
b. The results of marginal sales equal to marginal cost.
C. Production Function
Is a relationship between the factors of production, such as labor, land, capital and expertise with the level of production that was created.
Q = f (K, L, R, T)
Q: number of production generated by various types of factors of production.
K: number of capital
L: number of workers
R: a wealth of natural
Q: The technology used

          

            Production factors as inputs and the number of production as output.
D. Production with One Factor Theory of Change
Simple theory which describes the production of the relationship between the level of production of goods with the amount of labor used to produce the level of production of goods. (Other production factors: fixed)
Then it will apply the Law of More and More Easing (The Law of Return Diminshing), states that:
"If the factors of production that can be converted amount (labor) plus as many as one continuous unit, initially the total production will be more pertambahannya, but after reaching a certain level of additional production will decrease and eventually reach negative values ​​and this causes the increase of total production the slower and eventually reaches a maximum level and then declined. "
1. Marginal production


Production caused by the increase of labor used.
MP: marginal production
ΔTP: accretion of total production
ΔL: the increase of labor
2. Production Average (Average Product)

      Production on average generated by each worker.







   AP: average production

   TP: production

   L: labor
TP curve relationship, APL and MPL
E. Production with Two Factor Theory of Change
1. Same production curve (Isoquant)

      The curve that describes the combined workforce of the capital that will generate a certain production level.
2. Same Line Cost Curve (Isocosts)
The line that describes the combined factors of production that can be obtained by using a number of specific cost.




F. Theory of Cost / Cost of Production
All expenditures incurred by the company to obtain factors of production and raw materials to be used for production.
· Cost of short-term productionShort-term production costs ie the time within which some production factors can not be accumulated.
Some understanding of short-term production costs:

       
1. Total Cost (TC)
Overall production costs incurred.
TC = TFC + TVC
2. Total Fixed Cost (TFC)
Overall costs incurred to acquire the factors of production that can not be altered in number.
3. Total Variable Cost (TVC)
Overall costs incurred to acquire the factors of production that can be changed in number
4. Average Fixed Cost
AFC = TFC / Q
5. Average Variable Cost
AVC = TVC / Q
6. The total average cost
AC = TC / Q
7. Marginal Cost
MCN = TCN - TCN-1 or ΔTC / ΔQTerms Pemaksimuman Benefits
1. Producing goods at a level where the difference between total sales with a total cost of the maximum
TR - TC = maximum
2. Producing goods at a level where the difference between the marginal cost = marginal sales.

      MR = MC
· Cost of long-term production
In the long run, companies can add all the factors of production, so that: the cost of production does not need to be divided into fixed costs and variable costs. All expenses are considered variable costs.
How to minimize costs
In the economic analysis of plant capacity curve described by the average total cost (AC = Average Cost).
Total Cost Curve Long-Run Average (curve LRAC)
The curve shows the minimum average cost for different production levels if the company can always change its production capacity.
The point of intersection of the curves AC is the most optimum cost of production / minimum for various levels of production to be accomplished producers in the long run.