The Production Function and the Law of Diminishing Marginal Returns

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The Production Function and the Law of
Diminishing Marginal Returns

• Firms, Production and Supply.

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Activity 2-6-1 Production Simulation Reflections

• Question 3 Using only one or two sentences,
  describe the relationship between inputs,
  marginal product and total product.

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What you need to do.

• Explain the difference between fixed and variable
  costs.
• Describe the difference between the short-run and
  long-run.
• Compute the average and marginal product for a
  single input given data on total output at
  different input levels.
• Explain how total product, average product, and
  marginal product can be computed.
• Explain the relationship between total product,
  average product and marginal product curves.
• Explain the Law of Diminishing Marginal
  Returns.
• Explain the theory of production
• Describe the Three stages of production.

• Theory of production
• Law of variable proportions
• Short-run
• Long-run
• Production function
• Total product
• Marginal product
• Stages of production
• Increasing Returns
• Diminishing Returns
• Negative Returns

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Law of Diminishing Marginal Returns.

• All other things remaining constant, if only one
  input is increased a point will be reached where
  each additional input produces less output than
  the previous input.
• Law of Diminishing Returns After a certain
  point, when additional units of a variable input
  are added to a fixed input, the marginal product
  of each additional variable input is less than
  the previous input.
• Diminishing returns always apply in the short
  run, and in the short run every firm will face
  diminishing returns. This means that every firm
  finds it progressively more difficult to increase
  its output as it approaches capacity production.

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Act. 2-6-1 Back Side
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Act 2-6-1 Backside
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The Production Function, Total Product and
Marginal Product
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Activity 2-6-2 A Closer Look.
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Act. 2-6-2 A Closer Look