Costs and Production 2 Flashcards
Describe the shapes of the short-run marginal cost, average variable cost, average fixed cost and average total cost curves Define the law of diminishing returns define and apply economic terminology
Total output of a particular good produced in a given period
total product
shows quantities of output that can be obtained from different amounts of a variable factor of production
total product curve
describes how output varies in the short run as more any 1 input is used together with fixed amounts of other inputs under current technology
total product curve
how total product changes with quantity of labor employed
total product curve
show how output varied with the number of variable inputs and reflects the law of diminishing returns
total product curve
change in total product that results from a 1 unit increase in the quantity of labor employed, with all other units remaining the same
marginal physical product
change in total product / change in variable product
marginal physical product
when the marginal physical product of a worker exceeds the marginal, physical product of the previous worker, the marginal physical product of the previous worker, the marginal physical product of labor increases and the firm experiences increasing marginal returns
initially increasing marginal returns
When the marginal physical product of a worker is less than the marginal physical product of the previous worker, the marginal physical product of labor decreases and the firm experiences _____
diminishing marginal returns
when marginal physical product of an additional worker is less than the marginal physical product of the previous worker
diminishing marginal returns
the marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs
law of diminishing returns
the increase in total cost associated with a one-unit increase in production
marginal cost (MC)
output per unit of variable factor
–how productive, on average
average product
total product / units labor
average product
when marginal product is > average product
average product increases because marginal product is the last number added in to compute the average product
