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Definition
the relationship between a firm's inputs and its output
determits its cost curves - the relationship between cost and quantity of output produced |
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| an organization that produced goods or services for sale by transforming inputs into outputs |
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an input whose quantity is fixed for a period of time and cannot be varied
land in the George and Martha example where they had 10 acres and could not get any more or lose any |
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Definition
an input whose quantity the firm can vary at any time
labor in the George and Martha example, they can hire as many workers as they want |
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| long run effect on whether a quantity is fixed or not |
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Definition
in the long run, firms can adjust the quantity of any input
there are no fixed inputs in the long run |
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| short run effect on whether a quantity is fixed or not |
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Definition
| in the short run, at least one input is fixed |
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shows the relationship between the quantity of the variable input and the quantity of the output for a given quantity of fixed input
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Term
| marginal product of labor (MPL) |
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Definition
the additional quantity of output produced when there is one additional unit of labor
change in quantity of output/change in quantity of labor
MPL = ΔQ/ΔL |
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| what is the significance of the slope of the toal product curve? |
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Definition
| it is equal to the marginal product of labor |
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| diminishing returns to labor |
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| when the marginal product of labor falls as the units of production increase |
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| diminishing returns to an input |
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Definition
when an increase in the quantity of that input, holding the quantity of all other inputs fixed, reduces the input's marginal product
negative MPL |
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