The production process: The bahaviour of profit maximizing firms
4 important questions on The production process: The bahaviour of profit maximizing firms
Which basic decisions do firms take to maximize their profit?
- Which production technology to use?
- How much of each input to demand?
What is the normal rate of return?
What does the term 'price taker' mean?
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Explain the different production process functions:
- Total product : Total output (production volume) with a certain amount of input (for example labor)
- Marginal product: Additional output that can be produced by hiring one more unit of a specific input, holding all other inputs constant.
- Average product : Average amount produced by each unit of a variable factor of production.
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