MGCR 293 Lecture Notes - Lecture 8: Marginal Product, Production Function, Marginal Revenue Productivity Theory Of Wages

• School: McGill University
• Department: Management Core
• Course: MGCR 293
• Professor: Kamal Salmasi

Document Summary

Managers must decide not only what to produce for the market, but also how to produce it in the most efficient or least cost manner. Production is the process by which inputs are combined, transformed, and turned into output. Production function is a table, graph, or an equation showing the highest output that a firm can produce for every specified combination of inputs given the state of technology. Average product of a variable input like x (capital, labour, etc) is: apx = q/x. Marginal product of a variable input like x is: mpx = dq / dx. Marginal product is the slope of the total product. At point a, the slope of the total production function is function highest; thus, marginal product is highest. At point c, total product is maximum, the slope of the total product function is zero, and marginal product intersects the horizontal axis. When mp > ap - ap is increasing.