1) law of diminishing returns

Question 1

what does the law of diminishing returns effect?

Answer 1

the short run

Question 2

what is the short run?

Answer 2

when there is at least one fixed factor of production

Question 3

what is the law of diminishing returns?

Answer 3

in the short run when variable factors of production (labour) are added to fixed factors (capital, land) then the total marginal product will initially rise then fall

Question 4

what is an example of a variable factor?

Answer 4

labour

Question 5

what is an example of a fixed factor?

Answer 5

capital

land

Question 6

how do you figure out marginal output?

Answer 6

change in total output
/
quantity of workers

Question 7

how do you figure out average output?

Answer 7

total output
/
quantity of workers

Question 8

in terms of the law of diminishing returns what are the two things which increases labour productivity?

Answer 8

specialisation

under utilisation of our fixed factors of production

Question 9

why must marginal output cut through average output at its highest point on a graph?

Answer 9

because the ‘one more additional’ unit contributes positively to the average output until the diminishing returns sets in