4. Marginal Returns and Productivity
d. describe the phenomenon of diminishing marginal returns;
What two things determine the cost of production?
As it relates to productivity and the relationship between production and cost, what is the cost function and what is the formula for it?
The cost function,
C = f(Q), is a relationship between the cost of production and the flow of output.
Input productivity is a measure of what?
Input productivity is a measure of the output per unit of input.
What are the differences between Total product of labor, Average product of labor, and Marginal product of labor?
- Total product of labor (
TP_L) is the amount quantity of output at each level of labor input
- Average product of labor (
AP_L) is the total product of labor divided by number of labor hours.
- Marginal product of labor (
MP_L), also known as marginal return, is the change in total product divided by the change in labor hours.
What is the law of diminishing returns?
It says that additional output must fall as more and more labor is added to a fixed amount of capital.