6.1 Production in the short run: the law of diminishing returns

law of diminishing returns

A law that states that as more and more units of a variable input (such as labour) are added to one or more fixed inputs (such as land), the marginal product of the variable input at first increases, but there comes a point when the marginal product of the variable input begins to decrease.

short run (microeconomics)

In microeconomics, it is a time period during which at least one input is fixed and cannot be changed by the firm.

long run (microeconomics)

In microeconomics, it is a time period in which all inputs can be changed; there are no fixed inputs.

marginal product (MP)

The extra or additional output that results from one additional unit of a variable input (such as labour).

average product (AP)

The total quantity of output of a firm per unit of variable input (such as labour).

total product (TP)

The total quantity of output produced by a firm.