The Production Function
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7 Terms
Production Function
Q = f(inputs); it shows the relationship between quantity of inputs used and quantity of output produced.
Total Product (TP)
The total quantity of output produced by a firm using a given quantity of inputs.
Marginal Product (MP)
The additional output produced by using one more unit of a specific input, holding other inputs constant.
Average Product (AP)
The output produced per unit of input, calculated by TP/Q input.
Marginal Product of Labor (MPL)
Calculated as ∆Q/∆L; it represents the change in output from employing one more unit of labor.
Diminishing Marginal Returns
The principle stating that adding more workers (or inputs) to a fixed resource will eventually produce less and less extra output.
Maximum Total Product (TP)
Occurs when the Marginal Product (MP) becomes negative.
