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9 Cards in this Set
- Front
- Back
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What is a Short Run (SR)? |
A Short run is a time frame in which the quantity of one or more input in production is fixed. |
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What is Long Run (LR)? |
A Long run is a timeframe in which quantities of all inputs are variable. |
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What is a short run technology constraint? |
In order to increase output in the short run, a firm must increase the quantity of labour employed. |
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Which three relation concepts best describes the relationship between output and the quantity of labour employed. |
1. Total product 2. Marginal product 3. Average product |
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What is the Total Product Curve (TP)? |
The maximum output that can be produced in a given time and for a given amount of labour. |
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What is Marginal Product of Labour (MP)? |
Marginal Product of labour is the change I'm total product. Due to a one unit increase in labour. |
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Equation from Average Product |
Total Product Curve / Labour = Average Product TP/ L = AP |
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Equation for Marginal Product |
New TP - Old TP = MP |
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What is the Law of Diminishing returns? |
As a firm uses more variable output with a given quantity of a fixed input, MP of the variable inputs diminish. |
