Marginal+Product

=Marginal Product=

[|Marginal product]is the additional quantity of unit product produced per unit increase of variable resources. Mathmatically, marginal product is the change in total product over the change in labor input. Maginal product eventually decreases because of [|diminishing marginal returns], because at some point additional units of labor are not as effective as the previous unit of labor. In the end marginal product can actually become negative and start bringing down the total quantity produced.

In general, marginals act as magnets for averages, meaning marginal product is directly responsible for average product. Specifically when marginal profit is higher then AP, AP increases and when MP is less than AP, AP decreases.

[|Marginal cost]is a related term. It is the change intotal cost over change in quantity. The inferse function of this graph explains diminishing marginal returns. Since marginals are magnets for averages, and marginals are 100% dependant on diminishing marginal return, everything, including Average Products and Average Costs are based on diminishing marginal returns.



Example Question: Are Marginal Product and Diminishing Marginal Returns related? a.) True b.) False

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Answer to Study Question: (a) True!