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10 Cards in this Set
- Front
- Back
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short-run
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some costs are pre-committed; lease for machines, building, worker contracts, etc.
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long-run
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can opt out of contracts
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fixed cost
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cost required for any production
e.g: restaurant- oven, building |
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variable costs
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depends on how much is produced
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diminishing returns
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eventually as you add more & more of one input, MPP declines
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marginal physical product (MPP)
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the increase in total output that results from a one-unit increase in the input quantity
= the change in TPP |
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marginal revenue product (MRP)
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the additional revenue that the producer earns from the increased sales when it uses an additional unit of the input
= MPP x price of output |
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profit
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= (P of output x TPP) - (P of input x quantity of input)
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optimal input rule
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if MRP > P of input, use more of the input until MRp falls to equal P of input
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what does MPP tell us about a TPP curve?
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slope
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