iv. vi. vii. viii. xi. xii. W The production function is an equation. table. or graph that shows the maximum output that can be produced from different combinations of inputs. Production refers to all activities involved in the production of goods and services. Fixed inputs are those that can never be changed. All inputs are variable in the long run. The firm plans in the short run and operates in the long an The law of diminishing retums is a long-run concept. The marginal product of the variable input is at a maximum at the level of output that corresponds to the inflection point on the short-run production function. The average product and the marginal product of the variable input are equal at the level of output that corresponds to the inection point on the short-run production function. II.l'|.|'hen an input's average product exceeds its marginal prod uct, average product is increasing. The law of diminishing returns holds that the marginal product of a variable input will eventually decline if output is increased while at least one input is fixed. Stage ll of production begins at a level of output I.vhere the average product ofthe van'able input is at a maximum and ends where the marginal product of the variable input is equal to zero. Stage E of production begins where the average product of the variable input is equal to the marginal product of the van'able input. The marginal revenue product of an input is equal to the rhangein the firm's total revenue that results from employing anadditional unit of a variable input