ap economics: module 54 terms

production function

the relationship between the quantity of inputs a firm uses and the quantity of output it produces

fixed input

an input whose quantity is fixed for a period of time and cannot be varied

variable input

an input whose quantity the firm can vary at any time

long run

the time period in which all inputs can be varied

• no fixed inputs in LR

short run

the time period in which at least one input is fixed

total product curve

shows how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input

marginal product of an input

the additional quantity of output produced by using one more unit of that input

• ΔQ_output/ΔQ_input

marginal product of labor

MPL = ΔQ/ΔL

slope of the total product curve

marginal product

relationship between MPL and L

inverse relationship; each successive worker adds less to total output than the previous worker

• as employment increases, the total product curve gets flatter

diminishing returns to an input

when an increase in the quantity of that input, holding the levels of all other inputs fixed, leads to a decline in the marginal product of that input

• “other things equal” concept

reason why the MPL curve is negatively sloped

diminishing returns to labor

what influences the position of the total and marginal product curves?

the quantities of other inputs

• ΔQ_inputs, total product and marginal product curves will shift

ways to mitigate diminishing returns to labor

• investments in capital

• improvements in technology