Topic 6. Microeconomic model of enterprise (5 hours)

1. Factors of production, their grouping. Motivation of the enterprise

2. The process of production and it’s objective. Production Function

3. Time and Production. Production in the Short-Run. Average, Marginal and Total Product. Law of diminishing returns

Give the definitions (and if possible formulas) to the following terms:

Enterprise

Firm

Production process

Production function

Factor of production

Total product

Average product

Marginal product

Name the following definitions, concepts and statements:

1. Main decision-maker in supplying goods and services

2. The relationship between the quantities of inputs and the maximum quantities of outputs produced by the firm

3. The quantity of the good or service produced by the firm

4. А ratio of output to factor input

5. The additional output as a result of adding one unit of factor

6. Product multiplied by its price

Answer the following questions:

1. What are the main kinds of the firms exist in the market economy?

2. What are the types of enterprises?

3. Give the definition to the production function. What is the formula of Cobb-Douglas function?

4. What are the main factors of production?

5. What are the relationships between total, average and marginal products?

6. What is the meaning of the Law of diminishing returns?

7. How to calculate marginal revenue product (MRP) or MPV (marginal product value)?

Solve the following tasks:

1. Fill the gaps in the table below. Graph curves TP, MP (figure 1) and MRP, w (figure 2). Find out the optimal number of worker the firm should employ. The price of a good produced is $100. Provide suitable formula and explanations. Make a conclusion.

L	TP	TR	MP	MRP	w	w*L	Pf
0	0
10	189				345
20	356				345
30	501				345
40	634				345
50	723				345
60	804				345
70	861				345
80	896				345
90	909				345
100	900				345

2. Fill the gaps in the table:

Labor	ТР	АР	МР
3		20
4	80
5			10
6	95