3.1

The Production Function

AP Microeconomics

Short Run vs. Long Run

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Total Product (TP)

Example Production Schedule

Marginal Product (MP)

Average Product (AP)

Law of Diminishing Marginal Returns

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TP rises at an increasing rate, then at a decreasing rate, then falls when MP becomes negative

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MP rises then falls; MP crosses AP at AP's maximum

Three Stages of Production

Why Diminishing Returns Matters

AP Exam Tips

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Common Mistakes

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Unit 3 topics

Unit 3 overview3.1The Production Function3.2Short-Run Production Costs3.3Long-Run Production Costs3.4Types of Profit3.5Profit Maximization3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit3.7Perfect Competition3.8Long-Run Equilibrium and Efficiency in Perfect Competition
← PreviousUnit 3: Production, Cost, and the Perfect Competition ModelNext →3.2 Short-Run Production Costs
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