Behind the Supply Curve: Input and costs - the Produciton function - the average product of labour
3 important questions on Behind the Supply Curve: Input and costs - the Produciton function - the average product of labour
How do we describe The average product of input? What does it mean? Formula? General rule?
- how much wheat is harvested per worker
- is the amount of output produced per unit of that input employed in the production process.
- APL=q/L
- As the number of workers increases, output rises but the average product of labor falls
Why is the entire average product of labor downward sloping? Why is this wrong? So what do the curves actually look like?
- The marginal product of labor is less than the average product of labor for all quantities of labor.
- MP and AP curves slope upward as firm increases it's variable input from some low level such as zero to sloping downward only at higher levels of the input
- they look like an inverted U-shape
3 Key Facts about the relationship between marginal product and average product? What happens when one is greater than, less than, or equal to the other? What does this tell us about the curves?
- When MP is greater than AP, AP rises
- when MP is less than AP, AP falls
- when MP is equal to AP, AP remains unchanged, and it is maximized when marginal product is equal to the average product.
This is why the AP, and MP curves have an inverted U shape
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