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What is Marginal Product?
We should also introduce a critical concept: marginal product. Marginal product is the additional output of one more worker. Mathematically, Marginal Product is the change in total product divided by the change in labor: MP = ΔTP / ΔL . In the table above, since 0 workers produce 0 trees, the marginal product of the first worker is four
trees per day, but the marginal product of the second worker is six trees per day. Why might that be the case? It’s because of the nature of the capital the workers are using. A two-person saw works much better with two persons than with one. Suppose we add a third lumberjack to the story. What will that person’s marginal product be? What will that person contribute to the team? Perhaps he or she can oil the saw's teeth to keep it sawing smoothly or he or she could bring water to the two people sawing.
Relate Topics
- Theory of the Firm
- Capital Formation
- Rent Seeking
- Structure Conduct Performance Model
- Integration
- Co-Insurance Effect
- Conglomerates
- Cost vs Profit Center
- Accelerator Theory
- Market Structure
- Fixed Cost vs Variable Cost
- Actual vs Implicit Costs
- Explicit Costs
- True Cost Economics
- Accounting Profit
- Economic Profit
- What are Factors of Production?
- Factor Income
- Production Function
- Fixed and Variable Inputs
- Short-Run and Long-Run Production
- Short Run
- Total Product
- Marginal Product
- Value of Marginal Product
- Law of Marginal Diminishing Product
- Production Function
- Production Possibilities Frontier
- Capital
- Labor Theory of Value
- How the Production Function Estimates Inputs
- Factor Payment
- Economic Rent
- Cost Function
- Incremental Cost
- Marginal Input Cost
- Fixed and Variable Costs
- Diminishing Marginal Productivity
- Costs Relate to Diminishing Marginal Productivity
- Law of Diminishing Marginal Returns
- Average Total Cost
- Average Variable Cost
- Marginal Cost
- Average Profit or Profit Margin
- Accounting Profit
- Economic Profit
- Normal Profit
- Short and Long-Run Production
- Cost Curves
- Long-Run Average Cost (LRAC)
- Production Technologies
- Economies of Scope
- Economies of Scale
- Diseconomies of Scale
- Minimum Efficient Scale
- Increasing, Constant, and Decreasing Returns to Scale
- Shape of the Average Long-Run and Short-Run Cost Curves
- Returns to Scale
- Diseconomies of Scale
- Long-Run Average Cost Curve Affect Industry Competitors
- Technology Shifts the Long-Run Average Cost Curve
- Law of Diminishing Marginal Returns