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Unformatted text preview: maximum attainable output from those inputs given current technology • We will assume that there are only wo inputs, labor (L) and capital (K) • Q= f(L,K) The Period of Production • Short run: A period of production during which some inputs cannot be varied • Long run: A period of production long enough for all inputs to be varied • There is more flexibility in the long run than in the shot run to vary production • Assume labor is a variable input and that capital is a fixed input in the short run The law of diminishing marginal returns The marginal product of a variable input eventually declines and approaches zero as a more is used in the short run. Labor productivity increases at first then decreases This law implies...
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- Spring '10
- Economics, 10%, Economics of production, 10 percent