Answer to Question #159823 in Microeconomics for jocelyn bantono

Question

marginal product

Answer 1

Marginal product refers to additional or increamental output from increasing labour by one more unit. It is measured by the gradient of the total product function or by the formula:

$MP_n = TP_n - TP_{n-1}$ Where TP represents total product and MP represents marginal product. Thus, the marginal product of the $n^{th}$ labour is the difference between the total product of the first $n$ labour units and that of the previous $(n-1)$ labour units.

Graphically, the marginal product function is $\cap -$ shapped due to diminishing marginal returns. Marginal product function increases initially due to increasing marginal returns, reaches maximum when diminishing marginal returns set in, and decreases due to diminishing marginal returns.