2 1.2 The Logic of Economic Theory.............................................................................. 2 1.3 Economic Theory as Abstraction............................................................................ 3 1.4 Economic Theory Versus Economic Model........................................................... 3 1.5 Representing Economic Relationships ................................................................... 4 1.6 Consumption Versus Production Economics ......................................................... 4 1.7 Microeconomics Versus Macroeconomics.............................................................5 1.8 Statics Versus Dynamics ........................................................................................ 6 1.9 Economics Versus Agricultural Economics ........................................................... 7 1.10 Agricultural Production Economics ....................................................................... 7 1.11 The Assumptions of Pure Competition................................................................... 8 1.12 Why Retain the Purely Competitive Model.......................................................... 10 1.13 Concluding Comments .........................................................................................10 Questions for Thought and Class Discussion ....................................................... 12 References............................................................................................................. 12 Chapter 2. Production With One Variable Input............................................................. 13 2.1 What Is a Production Function ............................................................................. 14 2.2 Fixed Versus Variable Inputs and the Length of Run .......................................... 17 2.3 The Law of Diminishing Returns ......................................................................... 19 2.4 Marginal and Average Physical Product .............................................................. 21 2.5 MPP and the Marginal Product Function ............................................................. 22 2.6 A Neoclassical Production Function .................................................................... 26 2.7 MPP and APP for the Neoclassical Function ....................................................... 28 2.8 Sign, Slope and Curvature .................................................................................... 29 2.9 A Single-Input Production Elasticity.................................................................... 33 2.10 Elasticities of Production for a Neoclassical Production Function....................... 35 2.11 Further Topics on the Elasticity of Production..................................................... 36 2.12 Concluding Comments .........................................................................................37 Problems and Exercises ........................................................................................ 37 Chapter 3. Profit Maximization with One Input and One Output................................. 39 3.1 Total Physical Product Versus Total Value of the Product .................................. 40 3.2 Total Factor or Resource Cost .............................................................................. 41 3.3 Value of the Marginal Product and Marginal Factor Cost.................................... 41 3.4 Equating VMP and MFC ..................................................................................... 43 3.5 Calculating the Exact Level of Input Use to Maximize Output or Profits ........... 45 3.6 General Conditions for Profit Maximization ........................................................ 51 3.7 Necessary and Sufficient Conditions.................................................................... 52 3.8 The Three Stages of the Neoclassical Production Functiom ................................ 52 3.9 Further Topics on States of Production ................................................................ 56 3.10 The Imputed Value of an Additional Unit of an Input ......................................... 56