AP Microeconomics / Unit 3: Production, Cost, and the Perfect Competition Model
3.1 The Production Function
Notes
- Short run: at least one input is fixed. Long run: all inputs vary.
- Marginal product $\displaystyle =\frac{\Delta TP}{\Delta L}$. Average product $\displaystyle =\frac{TP}{L}$.
- Diminishing marginal returns: adding workers to fixed capital eventually adds less output.
Practice
Workers: 2 → 3; total output: 30 → 38. MP of the third worker:
$38-30$.
Diminishing marginal returns happens because:
Fixed input.
In the long run:
Definition.
Ready for more? Take the Unit 3 test.