Answer to Question #183246 in Microeconomics for Ian Smit

Question

Consider the following short-run production function: TP = 𝒇(K̇ ,L) where TP = Total production K = Capital L = Labour 7.1.1. With reference to capital and labour, explain how production can be increased in the short run. 

Answer 1

In the short run, law of diminishing returns concurs that when more units are added to capital there will be a rise in production. There will be increase in the firm to support more production.

Diminishing returns to labour happens when the labour's marginal product begins to fall. Therefore, production can be increased with an increase in labor to support activities. This will increase total output, hence increased production.