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Theory Of Production - Coggle Diagram
Theory Of Production
Shotrun- When at least one of the factors of productions if fixed
Increasing marginal returns
Law of Dominishing(marginal) returns OR Law of variable proportions
Decreasing marginal returns
Marginal cost- cost of extra unit of output, cuts AC at min, point, U shaped
AFC curve keeps falling as output increases while fixed costs are fixed
Productive efficiency- producing at min point of AC curve
Marginal products + total products -n shaped curve
Longrun- When all factors of productions are variable
Increasing returns to scale- increase in inputs leads to more than proportionate increase in output
Constant returns to scale- increase in inputs leads to proportionate increase in output
Decrease return to scale- increase in inputs leads to less than proportionate increase input
LRAC curve comprised of several SRAC curves - min points form LRAC
Minimum efficient scale- lowest point of output at which costs are minimised
Different shapes - trapezium, u, continuously falling
Cost Of Production- the total amount paid as factorial payments by the firms is known as the cost of production
Explicit Cost/ Accounting Cost
=TR - Accounting Profit
=TR - (Implicit Cost+Economic Profit)
Implicit Cost
=TR-(Explicit cost + Economic Profit)
=Accounting Profit - Economic Profit