question
Production Theory
answer
1. product quantity + mix
2. inventory levels
3. forecast to production
2. inventory levels
3. forecast to production
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Production Function
answer
Specifies max output w/given quantity of inputs for given state of engineering + tech knowledge
question
Q = F(K,L,R) (Production Function Formula)
answer
Q = quantity
F = (Function) state of technology
K = Capital
L = Labor
R = Resources
F = (Function) state of technology
K = Capital
L = Labor
R = Resources
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Short Run
answer
capital is fixed; must change variable inputs
question
Short Run Variables
answer
add shifts
hire more workers
more energy/raw materials
24/7 operations
hire more workers
more energy/raw materials
24/7 operations
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Marginal Product
answer
additional output generated by additional input
=∆ Total Product / ∆ Inputs
=∆ Total Product / ∆ Inputs
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Law of Diminishing Return
answer
As variable resources (workers) are added to fixed resources (machinery, tool, etc.), the additional output produced from each new worker will eventually fall
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Fixed Cost (FC)
answer
"overhead"/"sunk costs"; doesn't change w/output (rent, interest rate)
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Marginal Cost
answer
additional cost incurred in producing additional unit of output
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AFC, ATC, & AVC Curves
answer
MC intersects ATC + AVC at lowest point with AFC at the bottom
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Long Run
answer
all factors adjustable
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Economies of Scale
answer
per unit output cost decreases as output increases -labor specialization, efficient capital use, etc
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Constant Returns to Scale
answer
no significant cost reduction
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Diseconomies of Scale
answer
costs increase as firm is too big to manage
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Minimum Efficient Scale
answer
smallest level of output where firm can min long run AC
-determine how many firms in industry + industry competition
-determine how many firms in industry + industry competition
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Natural Monopoly
answer
increasing returns to scale
e.g. railroads, utilities, etc
e.g. railroads, utilities, etc
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Price Elasticity of Supply Determinants
answer
factor mobility
production speed
inventory/excess capacity
time
production speed
inventory/excess capacity
time
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Big Operations Questions
answer
1. aggregate planning
2. inventory management
3. production management
4. supply chain management
2. inventory management
3. production management
4. supply chain management
question
Big Operations Management Decisions
answer
1. operations scheduling
2. project scheduling
3. facilities layout + location
4. quality + reliability
2. project scheduling
3. facilities layout + location
4. quality + reliability
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