Answer to Question #143975 in Microeconomics for Devin R Reome

Question

What is the relationship between the marginal product and marginal cost curves?

Answer 1

Marginal cost and marginal product are inversely related. They are both useful in describing short-run cost structure and behaviour. Marginal product control the behaviour of marginal cost.

When marginal product is increasing, the marginal cost is falling. The increase in marginal product emanates from increasing marginal returns. As a result, the increase in marginal product results in a fall in marginal cost.

When marginal product reaches maximum, at the point where diminishing marginal returns set in, marginal cost becomes minimum.

When diminishing returns set in, marginal product start falling. This results in an increase in marginal cost.

Thus, marginal product and marginal cost are inversely related, and marginal product controls the behaviour of marginal cost. Marginal product influences short-run cost structures and behaviour.