ECON101 Lecture Notes - Lecture 12: Marginal Product, Production Function, Marginal Cost

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2 Aug 2016

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Olivia Mesta

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Document Summary

Marginal product: the increase in output arising from an additional unit of that input (all other inputs constant, mpl = delta q / delta l. Comparing these helps the employer to decide whether he would benefit from hiring the worker: why it diminishes. Mp of an input declines as the quantity of the input increases. Less productive with less land to work for, for example. Flat line: variable cost (like cost of labour) vary with the quantity produced. Upward sloping: total cost (add fixed and variable costs) Upward sloping: marginal cost: the increase in total cost from producing one more unit. Mc = delta total cost / delta quantity. Diminishing mp implies increasing mc (and vice versa) Eg. marginal product of an extra worker is large, and the marginal cost is small (not all equipment is being used, and has a small quantity of lemonade being produced, so bringing in an additional worker is beneficial)

Related Questions

11. A critical assumption economists make about the relationship between the quantity of labour hired and the marginal product of labour is that:

a. The MP_L diminishes as additional units of labor are added to the production process.

b. The MP_L increases as additional units of labor are added to the production process.

c. The MP_L diminishes to an irreducible minimum, then increases (i.e., the MP_L curve is u-shaped).

d. The two variables are totally unrelated.

23. Diminishing marginal returns means that: a. as more capital is used in production, but the labour input is held constant, MPK falls. b. as labour increases and capital decreases for a given level of output, the marginal product of labour divided by the marginal product of capital increases. c. if capital and labour inputs double, output increases by less than double. d. a and c e. a and b.

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c