Unformatted text preview: When marginal yield is negative, there is diminishing total returns. If the marginal yield becomes smaller, there is diminishing marginal returns. Diminishing marginal return assumes technology stays constant Isoquant curve – efficient combinations of L and K that can produce a single quantity of output Marginal Rate of Technical Substitution (MRTS) – slope of the isoquant curve. Tells how many units of K can be replaced by one extra unit of L while keeping production constant-MP L /MP K = ΔK/ΔL = MRTS Returns to Scale – how output changes if all inputs are increased by an equal proportion...
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- marginal returns, Lecture Firm, capital Marginal Product