Chapter 5 - Chapter 5 Supply Decisions 1. Supply Supply is...

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1 Chapter 5 Supply Decisions 1. Supply Supply is the ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris paribus . 2. The Production Function A technological relationship expressing the maximum quantity of a good attainable from different combinations of factor inputs. How much output can be produced with varying amounts of factor inputs. Output of one resource depends on amount of other resources available to it. Pharmacy
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2 Efficiency Efficiency means achieving the maximum output attainable from given inputs. Every point on the production function represents the most possible output produced with a given number of workers. Capacity A production function shows how much output that can be produced with a given amount of inputs. Marginal Physical Product (MPP) The change in total output associated with one additional unit of input. A worker’s productivity (MPP) depends in part on the amount of other resources in the production process. Law of Diminishing Returns o The marginal physical product of a variable input declines as more of it is employed with a given quantity of other (fixed) inputs. Why output tends to increase at a diminishing rate:
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Chapter 5 - Chapter 5 Supply Decisions 1. Supply Supply is...

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