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27 Cards in this Set

  • Front
  • Back
average product
Total product divided by units of input employed
constant returns to scale
When a given percentage increase in all inputs leads to an identical percentage increase in output
continuous production function
Production function where inputs can be varied in an unbroken marginal fashion
decreasing returns to scale
When output increases at a rate less than the proportionate increase in inputs
discrete production function
Production function with distinct input patterns
economic efficiency
Achieved when all firms equate input marginal revenue product and marginal cost (maximize profits)
expansion path
Optimal input combinations as the scale of production expands
increasing returns to scale
When the proportional increase in output is larger than an under-lying proportional increase in input
input substitution
Systematic replacement of productive factors
isocost curve (or budget line)
Line of constant costs
Different input combinations used to efficiently produce a specified output
labor productivity
Output per worker hour
law of diminishing returns
As the quantity of a variable input increases, the resulting rate of output increase eventually diminishes
marginal product
Change in output associated with a 1-unit change in a single input
marginal rate of technical substitution (MRTS)
Amount of one input that must be substituted for another to maintain constant output
marginal revenue product
Amount of revenue generated by employing the last input unit
multifactor productivity
Output relative to the combined inputs of labor, capital, and intermediate purchases
net marginal revenue
Marginal revenue after all variable costs
output elasticity
Percentage change in output associated with a 1 percent change in all inputs
power production function
Multiplicative relation between input and output
production function
Maximum output that can be produced for a given amount of input
productivity growth
Rate of increase in output per unit of input
returns to a factor
Relation between output and variation in only one input
returns to scale
Output effect of a proportional increase in all inputs
ridge lines
Graphic bounds for positive marginal products
technical efficiency
Least-cost production of a target level of output
total product
Whole output from a production system