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