7.3 Production in the Short Run

Question 1

What is Total Product (TP)?

Answer 1

Total product (TP) is the total amount produced during a given period of time.

Question 2

What is Average Product (AP)?

Answer 2

Average product (AP) is the total product divided by the number of units of the variable factor used to produce it. AP=TP/L if L is the number of units of labour

Question 3

What is marginal product (MP)?

Answer 3

Marginal product is the change in total output that results from using one more unit of a variable factor. MP= ΔTP/ΔL

Question 4

Define the law of diminishing returns?

Answer 4

To increase output in the short run, more and more of the variable factor is combined with a given amount of the fixed factor. Each successive unit of the variable factor has less and less of the fixed factor to work with. Eventually, equal increases in work effort begin to add less and less to total output.