chap8 - Chapter 8 Costs and production Production The total...

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    Chapter 8 – Costs and production
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    Production The total amount of output produced by  The total amount of output produced by  a firm is a function of the levels of input  a firm is a function of the levels of input  usage by the firm usage by the firm Total Physical Product (TPP) function -  Total Physical Product (TPP) function -  a short-run relationship between the  a short-run relationship between the  amount of labor and the level of output,  amount of labor and the level of output,  ceteris paribus ceteris paribus . .
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    Total physical product (TPP)
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    Law of diminishing returns as the level of a variable input rises in a  production process in which other inputs  are fixed, output ultimately increases by  progressively smaller increments.
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    Average physical product  (APP) APP = TPP / amount of input Quantity of labor TPP APP 0 5 10 15 20 25 30 35 40 45 0 50 120 180 220 250 270 275 275 270 - 10 12 12 11 10 9 7.86 6.88 6
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