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1 Production Functions and Returns Free Online FlashCards

Study 1 Production Functions and Returns with 12 free online flashcards. Review key terms, definitions, and concepts with this interactive flashcard deck.

12 cards

Front

What does a production function describe?

Back

A production function describes the maximum output a firm can produce from specified inputs, given its technology and production methods.

Front

What is total product?

Back

Total product is the amount produced with a given combination of inputs.

Front

What defines the short run in production?

Back

The short run is a period in which at least one input is fixed; its length depends on how quickly the firm can adjust inputs.

Front

What does the law of diminishing marginal returns state?

Back

With at least one input fixed, adding more units of a variable input eventually reduces that input's marginal product, other things unchanged.

Front

What do returns to scale measure?

Back

Returns to scale describe how output changes when all inputs increase in the same proportion.

Front

How is marginal cost related to wage and labor's marginal product?

Back

If labor is the only variable input and the wage is constant, marginal cost is $MC=\frac{w}{MP_L}$ .

Front

In $Q=f(L,K)$ , what do $L$ and $K$ represent?

Back

In $Q=f(L,K)$ , $Q$ is output, $L$ is labor, and $K$ is capital.

Front

What is the marginal product of an input?

Back

Marginal product is the additional output from using one more unit of an input while holding other inputs constant.

Front

How is labor's marginal product calculated?

Back

Labor's marginal product is $MP_L=\frac{\Delta Q}{\Delta L}$ , the change in output divided by the change in labor.

Front

What does the slope of a total-product curve represent?

Back

It corresponds to the slope of the total-product curve.

Front

What defines the long run in production?

Back

The long run is a period in which all inputs can be varied, though a firm need not change every input.

Front

Does diminishing marginal product mean total product falls?

Back

No. While marginal product is positive, total product still rises, but at a decreasing rate. Total product falls only when marginal product is negative.

1 Production Functions and Returns Free Online FlashCards

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