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Chapter 6

# Chapter 6 - Kimberly Zhang Chapter 6 • Technically...

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Unformatted text preview: Kimberly Zhang Chapter 6 • Technically efficient on f(L, K) curve • Increasing marginal returns to labor (concave up): region along total product function where output rises with additional labor at an increasing rate • Diminishing marginal returns to labor (concave down, positive slope): region along total product function where output rises with additional labor but at a decreasing rate o MP L begins to decrease • Diminishing total returns to labor (concave down, negative slope): region along product function where output decreases with additional labor • Average product of labor (AP L = Q/L): the average amount of output per unit of labor o Slope of ray from origin to total product curve at that point • Marginal product of labor (MP L = ∆ Q/ ∆ L): rate at which total output changes as quantity of labor the firm uses changes o Equals slope of total product curve at that point o AP L = MP L when AP L is at maximum • Law of diminishing marginal returns: as usage of one input increase, quantities of other input held...
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Chapter 6 - Kimberly Zhang Chapter 6 • Technically...

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