ECO101H1 Chapter Notes - Chapter 11: Average Cost, Average Variable Cost, Marginal Product
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ECO101H1 Full Course Notes
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Chapter 11: behind the supply curve: inputs and costs. Firm is an organization that produces goods or services for sale; to do so, they must transform input into output. Production function: quantity of output a firm produces depends on the quantity of inputs & the state of generosity of the production technology. Fixed input: input whose quantity is fixed for a period of time & cannot be varied. Variable input: input whose quantity the firm can vary at any time. Quantity of an input depends on the time horizon. Figure 11-2 shows the marginal product of labour depends on the number of workers employed. In this example, the marginal product of labor falls as the number of workers increase = diminishing returns to labour. Diminishing returns to labour: when an increase in quantity of that input, holding the quantity of all other inputs and the production technology fixed, reduces the input"s marginal product.