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Managerial Economic chapter 5

Managerial Economic chapter 5 - Managerial Economic Chapter...

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Managerial Economic Chapter 5 1) Define the production function A production function is a descriptive relation that links inputs with output. It specifies the maximum feasible output that can be produced foe given amounts of inputs. Production functions are determined by the available technology. 2) Distinguish between returns to scale and returns to a factor. Return to scale refers to the relation between output and the proportional variation of all inputs taken together. Return to a factor refers to the relation between output and the variation in a single input, holding other inputs fixed. 3) Discuss figure 5.1 on page 147 Base on the law of diminishing returns. Marginal product of a variable factor eventually will decline as its use is increased. Marginal cost and average product are equal where average product is at a maximum. Total product increases at an increasing rate when marginal product is falling but positive total product continue to increase but does so at a decreasing rate. When marginal product falls below zero, total product
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