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 HOMOGENEOUS OF DEGREE N: A property of an equation the exists if independent variables are increased by a constant value, then the dependent variable is increased by the value raised to the power of n. The value of n can be greater than, less than, or equal to one. This property often surfaces in the analysis of production functions. If n = 1, then a doubling independent variables results in a doubling of the dependent variable and the production function has constant returns to scale. If n > 1, then a doubling independent variables results in more than a doubling of the dependent variable and the production function has increasing returns to scale. If n < 1, then a doubling independent variables results in less than a doubling of the dependent variable and the production function has decreasing returns to scale.
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 Lesson 4: Production Possibilities | Unit 3: The Curve Page: 10 of 24

 Topic: Connecting Points <=PAGE BACK | PAGE NEXT=>

Like a constellation in the sky, we will find it convenient to outline an 'image' by connecting the individual points.
• Connecting our 11 points lets us include other options. These are only 11 of many possibilities.
• The curve we get is the production possibilities curve. It's also termed the production possibilities frontier for reasons that will become clear as we continue this lesson.
• Note that the curve is flat at the top and steep at the bottom.

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MARGINAL PRODUCT CURVE

A curve that graphically illustrates the relation between marginal product and the quantity of the variable input, holding all other inputs fixed. This curve indicates the incremental change in output at each level of a variable input. The marginal product curve is one of three related curves used in the analysis of the short-run production of a firm. The other two are total product curve and average product curve. The marginal product curve plays in key role in the economic analysis of short-run production by a firm.

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 JFEJournal of Financial Economics
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