PRD-1.A—a. Define (using graphs where appropriate) key terms and concepts relating to production and cost. b. Explain (using graphs where…

a. Define (using graphs where appropriate) key terms and concepts relating to production and cost. b. Explain (using graphs where appropriate) how production and cost are related in the short run and long run. c. Calculate (using data from a graph or table as appropriate) the various measures of productivity and short-run and long-run costs.

• The production function explains the relationship between inputs and outputs both in the short run and the long run.
• Marginal product and average product change as input usage changes, and hence, total product changes.
• Diminishing marginal returns occur as the firm employs more of one input, holding other inputs constant, to produce a product (output) in the short run.
• Enduring understanding PRD-1: Firms’ production and cost constraints over different input and output levels shape optimal decisions in the short run and long run.