3.1 The Production Function
The short-run production function links inputs to output: marginal product eventually falls as diminishing marginal returns set in because capital is fixed.
The production function maps inputs to total product (output). In the short run at least one input — usually capital — is fixed, so a firm can vary output only by adding workers; in the long run every input is variable.
Marginal product is the extra output from one more unit of labor (ΔTP ÷ ΔL); average product is output per worker (TP ÷ L). Marginal product may rise at first from specialization, but the law of diminishing marginal returns guarantees it eventually falls: with fixed capital, each added worker has less machinery to work with.
Keep the stages straight on table questions: while MP is positive, total product is still rising even if MP is falling; only when MP turns negative does total product decline. Diminishing returns is also the reason marginal cost eventually rises — MP and MC are mirror images.
Key terms for 3.1
Drag the curves yourself — the fastest way to make 3.1 stick.
Confusing diminishing marginal returns with falling output. Diminishing returns means MP is FALLING but still positive — total product keeps rising. Output only falls when MP goes negative.
Get AP Econ exam tips in your inbox
Occasional emails with study tips, new interactive graphs, and exam-season reminders. Free — no spam.
No spam. Unsubscribe anytime.