Question

Total product (TP) : Total quantity, or total output, of a particular good or services produced.

Marginal product (MP) : Extra output or added product associated with adding a unit of a variable resource, in this cas labor, to the production process

                                              Marginal product (MP) = Change in total output / change in labor input

Average product (AP) is total output per unit of a resource employed.

Question: How do these concepts relate to short and long run production strategies?

Answer 1

The theory of production explains the principles by which a business firm decides how much each commodity it sells and how much commodity it will produce and how much each kind of labor raw materials, fixed capital goods, etc that it employs it will use.

The short run is the period where factors of production is considered as . Usually capital is considered constant in short run.

In long run, all the factors of production are variable.

The law of diminishing marginal return explains the behavior of output in the short run.

Total product

Marginal ProductThe output will increase at increasing rate till L_1. Therefore the marginal product is increasing till L1. Therefore MP rises till L1

Adding extra workers increases total output, but are

at a decreasing rate, more workers contribute less each, and marginal product begins to fall ( L1 to L 2) . Hiring more worker adding less to the output.  

After L2 there is too much labor for the available capital, workers get in each other's way and each contribution of everyone new workers in negative.

Average Product

Total product/ Variable factor of production. Average Product is maximum at the point that Total product is steepest.

Marginal Product

If Marginal product> Average Product, then Average product will rise.

If Marginal product<Average Product, then Average product will drop

If Marginal product= Average product, then Average product will be at maximum.

If