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.