Average product of labor

In the short-run, the law of diminishing returns states that as we add more labor to fixed capital the change in total output will first rise and then start to fall. This means that even though production will keep on rising with extra worker added the marginal product of labor decreases. Short-run production function can either be illustrated as a table, see table 1 or as a formula. The formula is: y = f(x1,x2,…,xn; k1, k2, .. kn) where y is quantity of output, x is the variable factors, x1 being the first one and k is fixed factors where k1 is the first one.

Production function

The assignment is a production function group assignment divided in to two parts. The first question that is answered is: “How is the short-run production function different from a long-run one? Explain how a firm can select the optimal quantity of input in each case ” And the second question is: “Elaborate on the various methods of reducing the ATC in the imminent short run and in the long run. ” 2. PRODUCTION FUNCTION Production function is a function that specifies optimal output of a production from all combinations of input.