Module 13. The Short Run Production Function. Objectives. Define a production function, define the three concepts of production–total product, marginal product, and average product, know how to calculate these production variables and be able to graph the product curves.
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Module 13
The Short Run Production Function
Q = f (labor, capital, flour, sugar...)
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Q = f (L, K)
where Q = total product or output, L = labor and
K = capital
reflect this. For example,
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1. Total product of labor (TPL)
This is simply the total output produced by labor, holding capital fixed. Total product is also called output.
2. Average product (APL) = Q/L
The average product of labor or average output is
the commonly used measure of productivity.
3. Marginal product (MPL) = ∆Q/∆L
It is defined as the additional output produced when the firm hires one more unit of labor input, holding capital fixed.
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Numerical Example:The Acme Box Company produces wooden boxes using two inputs, L and K. Capital (K) is fixed at K0. The total product schedule is given in the Table below.
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Increasing Marginal Returns
Diminishing Marginal Returns
Negative Marginal Returns
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Columns (1) and (2) of the Table represent the total product schedule. Graphing this data gives the total product curve.The total product curve is also called the graph of the short run production function.
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Define the law of diminishing marginal returns
and understand its significance.
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Understand the relationship between marginal product and average product
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Objective 3: The marginal-average relationship
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Between 1 and 4 units of labor, marginal product
lies above average product, and average product
is increasing.
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Between the 5th and the 11th unit of labor,
marginal product lies below the average
product and average product is falling.
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Diminishing marginal returns set in after the
3rd unit of labor where marginal product reaches a maximum.
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From the 4th to the 9th unit of labor marginal product is positive but it is
diminishing.