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Law of Diminishing Marginal Productivity
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extra product attributed to each additional unit of a variable additional input will decline
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Firm
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It operates within the market, and replace it with command and control.
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What can by increasing number of firms does while cost structure change because of technological advances ?
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It effectively provide organisational activities for production-oriented firms.
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Explicit cost
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Help determine what to include in total cost
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Implicit cost
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The opportunity cost of the factors of production provided by the owner of the business
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Accounting profit
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Revenue - Explicit Cost
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Total revenue
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Quantity x Price
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Total cost
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Change in explicit cost of production + Opportunity cost of factor
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Economic profit
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Revenue-(Explicit+Implicit cost)
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Long-run decision
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The firm can choose among all possible production techniques.
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Short-run decision
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The firm is constrained generally by its current facility regard what production decision t can make
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Marginal Product
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additional output resulting from an additional input
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Average Product (/ Output per worker)
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Total output / The quantity of the input
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Marginal P > Average P ; Average P < Marginal P
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Average P= Rising ; Average P= Falling
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When will Marginal Product occur?
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When the production changes
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Firms are likely to operate on what portion of the marginal productivity curve?
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...
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Range of production
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1. marginal product increases and the variable input experiences increasing marginal returns, the marginal cost curve declines.
2.marginal product increases and the variable input experiences decreasing, cost curve rising
2.marginal product increases and the variable input experiences decreasing, cost curve rising
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Increasing Marginal Returns
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marginal cost declines ; Because each additional worker is increasingly more productive, a given quantity of output can be produced with fewer variable inputs
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Decreasing Marginal Returns
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marginal cost increases ; Because each additional worker is less productive, a given quantity of output needs more variable inputs.
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Production
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occurs when factors of production (inputs) are transformed into good and services
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Limited Liability
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the stocker's liability is limited to the amount that stocker has invested in the company
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Types of firms
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1. Sole Proprietorship: Businesses that have only one owner
2. Partnership:Businesses with two or more owners (create possibilities for sharing the burden)
3. Corporations: Businesses that are treated as a person ans are legally owned by their stockholder
2. Partnership:Businesses with two or more owners (create possibilities for sharing the burden)
3. Corporations: Businesses that are treated as a person ans are legally owned by their stockholder
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The rising portion
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is the result of increasing marginal returns
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The falling portion
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The falling portion is attributable to decreasing marginal returns, and in particular, the law of diminishing marginal returns.
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Accounting profit Vs Economic profit
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The difference between the revenue received by a firm and the explicit accounting cost incurred. ;
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