Chapter 7 Flashcards
1
Q
Marginal
A
- Refers to incremental changes, either increases or decreases.
2
Q
production function
A
- relationship between the quantity of inputs used and output produced
3
Q
Total physical product (TPP)
A
- The amount of production expected from using each input level
4
Q
Average physical product (APP)
A
- average amount of output produced per unit of input.
- TTP / Input
5
Q
Marginal physical product
A
- The additional total physical product (TPP) produced by using an extra unit of input.
- △TTP / △Input
6
Q
Stages Production Function
A
Stage 1: Increasing Marginal Returns to Labor
Stage 2: Diminishing Marginal Returns to Labor
Stage 3: Negative Marginal Returns to Labor
7
Q
Marginal Revenue
A
- the change in revenue from producing one more unit.
MR = ∆ TR / ∆ Output
8
Q
Marginal Cost
A
- change in cost associated with producing one more unit.
MC = ∆ Cost / ∆ Output
9
Q
Decision Rule
A
MR = MC leads to profit maximizaiton
10
Q
Marginal Value Product (MVP)
A
- Is the change in revenue with one more unit
= ΔTR / ΔIP
11
Q
Marginal Input Cost (MIC)
A
- The cost of buying one more unit of input.
MIC = ΔTC / ΔIP
12
Q
Equal Marginal Principal
A
- A limited input should be allocated among uses so MVPs of each unit used are equal
