Questions and Answers
What is the total product?
The total quantity of output produced by a firm.
What is marginal product?
Is the extra or additional output resulting from one additional unit of the variable input (usually labor).
What is the formula for marginal product?
MP = Change in Total Product (TP) / Change in variable units (labor).
What is the average product?
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What is the formula for average product?
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What is total cost?
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What is the formula for total cost?
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What is average costs?
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What is the formula for average fixed cost?
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What is the formula for average variable cost?
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What is the formula for average total cost?
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What is the relationship between average total cost?
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What is marginal costs?
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What is the formula for marginal costs?
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Study Notes
Production Concepts
- Total Product: Represents the overall quantity of goods produced by a firm.
- Marginal Product: Refers to the additional output produced when one more unit of a variable input (usually labor) is employed.
- Marginal Product Equation: Calculated as the change in Total Product divided by the change in variable units (labor).
Average Product
- Average Product: Indicates the quantity of output produced per unit of variable input (labor).
- Average Product Equation: Determined by dividing Total Product by the number of variable units (labor).
Costs
- Total Cost: The cumulative sum of fixed costs and variable costs associated with production.
- Total Cost Equation: Defined as Total Cost equals Fixed Cost plus Variable Cost.
Average Costs
- Average Costs: Obtained by dividing total costs by the quantity of output produced.
- Average Fixed Cost Equation: Average Fixed Cost equals Total Fixed Cost divided by Quantity.
- Average Variable Cost Equation: Average Variable Cost equals Total Variable Cost divided by Quantity.
- Average Total Cost Equation: Average Total Cost equals Total Cost divided by Quantity.
- Relationship: Average Total Cost can also be derived from adding Average Fixed Cost and Average Variable Cost.
Marginal Costs
- Marginal Costs: Defined as the additional cost incurred from producing one more unit of output.
- Marginal Cost Equation: Calculated by finding the change in Total Cost divided by the change in quantity produced or alternatively, the change in Total Variable Cost divided by the change in quantity.
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Test your knowledge on key concepts related to production, costs, revenues, and profits with these flashcards. Each card presents definitions and equations that are essential for understanding economic production dynamics.