1.5.1-1.5.2
Production in the short run: the law of diminishing returns
Short run: a period when at least one FOP is fixed
Long run: a conceptual moment in time when all FOPs are variable
– Total product: the # of units of output produced in each
period
– Average product: the quantity of total output produced per
unit of the variable factor while holding all other factors
constant AP=TP/V
– Marginal product: the change in total output brought about
by adding one more unit of the variable factor MP=^TP/^V
Law of diminishing returns:
As more units of the variable factors are added to a given quantity
of the fixed factor the additional output gained from each additional
unit of the variable factor employed will at some point begin to fall
Costs of production: economic costs
