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Unformatted text preview: 18 Book Notes, Econ 201 Factors of Production: the inputs used to produce goods and services Labor, Land & Capital The demand for a factor of production is a derived demand . In the Market for Factors of Production, we assume 2 things: 1. Our firm is competitive both in the market for the good and the service to get the good 2. The firm is Profit-Maximizing Production Function: The relationship between the quantity of inputs used to make a good and the quantity of output of that good Marginal Product of Labor: The increase in the amount of output from an additional unit of labor Diminishing Marginal Product: The property whereby the marginal product of an input declines as the quantity of the input increases Value of the Marginal Product: The marginal product of an input times the price of the output Marginal Revenue Product: the extra revenue the firm gets from hiring an additional unit of a factor of production...
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This note was uploaded on 10/13/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.
- Spring '10