Unformatted text preview: x nearly the same as the interest rate on risk-free government bonds for relatively risk-free firms x higher for relatively more risky firms Production Process optimal method of production minimizes cost production technology – relationship betw/n inputs & outputs x labor-intensive technology relies heavily on labor instead of capital x capital-intensive technology relies heavily on capital instead of labor production function – units of total product as func. of units of inputs average product – average amount produced by each unit of a variable factor of production (input) marginal product – additional output produced by adding one more unit of a variable factor of production (input), ceteris paribus used labor of units total product total labor of product avg. used labor of units product total labor of product marg. ' ' Page 88...
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- Fall '10
- Economics, variable factor, normal rate, total product, economic) cost, relatively riskfree firms