C H A P T E R6P r o d u c t i o na n d B u s i n e s s O r g a n i z a t i o n CHAPTER OVERVIEW AND TEACHING TIPSThe micro chapters in this text present the fundamentals of production theory and business organization before cost schedules are derived and market structures are explored. This ordering of topics emphasizes the links between produc- tion and cost, on the one hand, and business organization and market structure, on the other. Chapter 6 is a relatively short chapter that covers only the basics of the standard theory of production and of business organization. Production functions, marginal products, average products, the law of diminishing returns, returns to scale, and technological change are all introduced here. So, too, are the differences between proprietorships, partnerships, and corporations.Having covered this material carefully, you will be able to demonstrate how cost curves are derived from production functions; that derivation is the focus of Chapter 7. Emphasize the relationships between these cost curves and both input prices and technology. This will build a strong foundation for future coverage of the supply side of product markets and the demand side of input markets. When you turn in later chapters to how changes in these factors affect market equilibria in various market structures, the linkages will be there to use.LEARNING OBJECTIVES1. Define a production function and relate it to the notions of total product, marginal product, and average product.2. Explain the law of diminishing marginal returns. Define constant, increasing, and decreasing returns to scale, and relate each to the law of diminishing marginal returns.3. Compare and contrast the measures o...
