ECON 1010 Lecture Notes - Lecture 11: Diminishing Returns, Average Cost, Marginal Product
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12 Dec 2017
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Decision time frames: firms make decisions, all rms make similar decisions about how to produce, which unlike other decisions, does not depend on the industry the rm operates in, this deals with the relationship between output and cost. Short-run technology constraint: to increase output short-run, a rm must increase the quantity of labour employed. Product curves: graph the relationship between employment and the three product concept de ned above. Total product curve: shows the boundary between attainable (on and below the curve) and unattainable (above the curve), points below curve are inef cient-more labour than necessary used to produce an output, as employment increases, graph become less steeper. Increasing marginal returns: increased marginal return occurs when the marginal product of an additional worker exceeds the marginal product of the previous worker, happens from increased specialization and dividing labour in the production process. As a rm uses more of a variable factor of production with a given quantity of a.
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