Post on 06-Jul-2018
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Marginal
Productivity
Theory
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Marginal PhysicalProduct
Extra Output fromeach additionalunit of resource
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Marginal Revenue
Product
Price x Extra OutputChange in Total RevenueResulting from the use of
each additional unit ofresource
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See Overhead 4.
Perfect competition
!dding one varia"leresource # la"or
Columns and $
demonstrate the la% ofdiminishing returns
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&a% of 'iminishingReturns
!s successive increments ofa varia"le resource (la"or)are added to a *xed resource+the marginal product of the
varia"le resource %illeventually decrease.
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arg na esourceCost
!mount %hich each
additional unit ofresource adds to a
*rms total (resource)cost
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MRP,MRC Rule
-t is pro*ta"le for a *rm
to hire additional unitsof a resource up to thatpoint at %hich that
resources MRP,MRC
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MRP,MRC
and
MR,MC
Rationale the same
/T point of reference
is no% inputs of a resource
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mper ec a orMar0et
2irm is a price ma0er
Pure monopoly+ oligopoly+monopolistic competition
'o%n%ard sloping demand
curve
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MRP of competitive
seller falls for onereason3
Marginal Productdiminishes
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MRP of -mperfectly
competitive seller falls fort%o reasons3
5 Marginal Product diminishes
65 Product price falls as outputincreases
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Conclusions
2or revie% chec0 out
chapter 67pages 8$458$9
Ta"les 675 and 6756same as overheads