Questioni) "When marginal product is rising, marginal cost is falling. And when marginal product is diminishing, marginal cost is rising." Illustrate and explain graphically. Land Labor Total product Marginal Product Average Product 20 0 0 - - 20 1 15 - - 20 2 34 - - 20 3 - 17 - 20 4 - 14 - 20 5 74 - - 20 6 - 6 - 20 7 83 - - 20 8 82 - -
Studdy Solution
STEP 1
What is this asking? Show how rising marginal product leads to falling marginal cost, and how diminishing marginal product leads to rising marginal cost. Watch out! Don't mix up *marginal* values with *total* or *average* values!
STEP 2
1. Calculate Marginal Product
2. Calculate Average Product
3. Explain the Relationship
STEP 3
We're given the **total product** for each level of labor.
The **marginal product** is the *additional* output produced by adding *one more* unit of labor.
Let's calculate it!
STEP 4
When labor increases from **0 to 1**, total product increases from **0 to 15**.
So, the marginal product of the **1st** worker is .
STEP 5
When labor increases from **1 to 2**, total product increases from **15 to 34**.
So, the marginal product of the **2nd** worker is .
STEP 6
Continuing this pattern: * **3rd worker:** * **4th worker:** * **5th worker:** * **6th worker:** * **7th worker:** * **8th worker:** Notice how the marginal product initially *increases*, then *decreases* - this is the law of diminishing marginal returns in action!
STEP 7
The **average product** is the *total product* divided by the *number of workers*.
STEP 8
* **1 worker:** * **2 workers:** * **3 workers:** * **4 workers:** * **5 workers:** * **6 workers:** * **7 workers:** * **8 workers:**
STEP 9
When **marginal product** is *rising* (like when we add the 2nd worker), each additional worker adds *more* output than the previous one.
This means the cost of producing each *additional* unit of output is *falling* (**marginal cost is falling**).
STEP 10
When **marginal product** is *falling* (like when we add the 4th worker), each additional worker adds *less* output.
This means the cost of producing each *additional* unit is *rising* (**marginal cost is rising**).
STEP 11
Graphically, this can be shown by plotting **marginal product** and **marginal cost** curves.
When marginal product is rising, the marginal cost curve will be falling, and vice-versa.
STEP 12
When marginal product *increases*, marginal cost *decreases*.
When marginal product *decreases*, marginal cost *increases*.
This inverse relationship is a fundamental concept in economics.
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