Chapter 7 Production Economics notes

Chapter 7 Production Economics notes - Three Stages of...

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Three Stages of Production Stage one is when the range of labor over which the average product is increasing. Stage two corresponds to the range of Labor from the point at which the average product is at a maximum to the point where the marginal product declines to zero. Stage three encompasses the range of Labor over which the total product is declining or, equivalently, the marginal product is negative. Stage three corresponds to all values of Labor where crowding effects overwhelm any output attributable to additional workers. To determine the optimal quantity of labor input to employ, a rational producer would not operate the production process over the excessive range of values of input Labor contained in Stage three, because the marginal product of input of labor is negative beyond an additional worker. Which of the following are not one of the three stages of production economist analyze when looking at the production function? a. Total Product Feedback; No, try again remember to focus on stages of production based on the relationships among the Total Product, Average Product, and Marginal Product function. b. Law of Diminishing Return Feedback; Correct, In looking at the three stages of production economist analyze production function by looking at three different stages of production based on stages of production based on the relationships among the Total Product, Average Product, and Marginal Product function. c. Average Product Feedback; No, try again remember to focus on stages of production based on the relationships among the Total Product, Average Product, and Marginal Product function.
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d. Marginal Product Function When looking at the production functions with variable inputs we are looking at how a firm has to decide which different inputs are in order to operate the production process using any of the capital-labor combinations.
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