Chapter 43 Flashcards
What is average product?
Average product is the quantity of output per unit of factor input. It is the total product divided by the level of ouput.
What is the law of diminishing returns or variable proportions or marginal productivity?
If increasing quantities of a variable input are combined with a fixed input, eventually the marginal product and then the average product of that variable input will decline. Diminishing returns are said to exist when this decline occurs.
What is the long run?
The period of time when all factor inputs can be varied, but the state of technology remains constant.
Define marginal product.
Marginal product is the addition to output produced by an extra unit of input. It is the change in total output divided by the change in the level of inputs.
What are returns to scale?
The change in percentage output resulting from a percentage change in all factors of production. There are increasing returns to scale if the percentage increase in output is greater than the percentage increase in factors employed, constant returns to scale if it is the same and decreasing returns to scale if it is less.
What is the short run?
The period of time when at least one of the factor inputs are fixed, usually capital.
What is total product?
Total product is the quantity of output measured in physical units produced by a given number of inputs over a period of time.
What is the very long run?
The period of time when the state of technology may change.
