1. The full total product is produced from the full total output from the factors of creation employed by the firm. It is the quantity of output produced per time period given the inputs. 2. The common product is computed through the total result divided by the number of systems of the variables of the factor of production.
For example, the 10 manufacturer employees produce 1000 units of electronic components of a computer, which means average product of labor is 10 units of digital components per employee. This example is produced by the output per worker used in the manufacturer. 3. The marginal product is the change of the total product when there is an additional device of the input in the factors of production. The excess labor (increased in the amount of workers) as an input product may raise the total product.
For example, the manufacturing plant intends to hire two additional employees then the 10 employees with a product of 1000 models may now increase to 1200 devices. Therefore , the marginal product is computed by the one-unit change may result to the increase of the full total product. The short run is a period where at least one insight of the factors of creation is fixed.
Usually a company or producers have to pay certain production cost form the expenses like the construction of creating for the management office, developing facilities, income or salaries of the labor and other overhead costs. In the short run,the firm cost structure must consider the fixed costs (FC) in a given period of time regardless of production level. The variable cost is from the production cost. Fixed Costs- The expense of creation of the investment utilized by the firm. The fixed cost will not differ whatever the production result.
These are over head cost, lease of offices and buildings, property tax, interest and amortization. Variable Cost- This indicates cost of the direct labor, raw materials, materials and supplies. The variable cost is associated in the production of goods. It must be noted that the full total Costs (TC) presents the sum of the of Total Variable Costs (TVC) and Total Variable Costs (TVC). In the brief run, the total product usually responds to the increase on the use of a variable input. However, you cannot add factory employees just to boost the production output simply.
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There is a certain point when the marginal product could no longer increase the production output because there are way too many workers to work on a fixed capital input exactly like machinery, equipment and facilities. The concept of law of diminishing returns is shown above with the production function variables of capital outlay, labor input, total output, marginal product and average product of labor.
Let us presume that the set capital input in the short run evaluation is 30 products available for the production of certain product. There’s a certain point of the administrative centre insight that could maximized the marginal product, however, after the maximum is reached by it point the marginal product falls which might show the sign of diminishing come back.