Chapter 6 Section 2

According to diminishing marginal product, if all the inputs to a firm are increased in equal proportions,

- The law of diminishing returns says nothing about what will happen to output when all inputs are increased in equal proportions.

Diminishing marginal product of labor occurs when:

- adding another unit of labor increases output, but not by as large a margin as the last unit of labor employed.

The marginal product of capital:

- is equal to the increase in output obtained from a one-unit increase in capital, holding other factors constant.

A production function:

- shows the relationship between inputs and the maximum output that can be produced from those inputs.

A firm can produce 840 gallons of paint per day with 6 workers, or 910 gallons per day with 7 workers. The marginal product of labor over this range of output (6 to 7 workers), stated in gallons per worker per day, is

70.

The short run is that period in which firms:

are able to vary some, but not all, inputs.

The long-run production period:

is characterized by all of the above.

Whenever the marginal product of a firm's only variable input was positive, but falling:

its total product is growing at a decreasing rate.

Which of the following is a reason that marginal product will eventually begin to fall?

limited amounts of fixed inputs

Over the range of diminishing marginal product, if the variable input to a firm is increased:

output will increase, but less than the proportion of the increase in the input.