Lecture 9 - Profit Maximisation (27/10/25)

What is the law of diminishing returns?

The law of diminishing returns states that when more units of a variable input (like labour) are added to fixed inputs (like machinery or land), the additional output gained from each extra unit will eventually start to fall.

What does diminishing marginal returns refer to?

Diminishing marginal returns refers to the point where adding an extra unit of a variable input results in a smaller increase in output than before.

What is the formula for Average Physical Product (APP)?

APP = \frac{TPP}{Q_{v}}

According to the law of diminishing returns, what are examples of fixed and variable inputs?

Fixed inputs include machinery or land, while variable inputs include labour.