Lecture 4 + 5 costs and revenue (not in tca)

Question 1

What is total physical product?

Answer 1

The amount of product the units of labour totally produce.

Question 2

What is average physical product?

Answer 2

total physical product // labour

Question 3

What is marginal physical product?

Answer 3

The change in total physical product // change in units of labour

Question 4

Whats average fixed cost?
Whats average variable cost?
Whats average total cost?
Whats marginal cost?

Answer 4

Fixed cost // total physical product
variable cost // tpp
total cost // tpp
change in total cost // change in tpp

Question 5

Whats the law of diminishing returns?

Answer 5

Law of diminishing returns sets in where the marginal cost is minimum. An example is that if the units produced for 1 labour is 10 then 2 is 21 then 3 is 30. The law of diminishing returns sets in between 2 and 3 as the average physical product has decreased.