Answer to Question #206525 in Microeconomics for Ede

Question

What is the relation between productivity and cost? Describe the association 

using equations for MC & MP, and AP & AC

Answer 1

Productivity and costs are a set of economic statistics that forecasts future inflationary tendencies using two criteria. Productivity is a term that measures how productive employees are in producing goods and services in the economy. Cost is a statistic that calculates the cost of labor per unit of product produced in the economy.

The relationship between marginal cost and the marginal product is explained by the law of diminishing returns. Because marginal cost and product are inversely proportional, the marginal product will always be at its highest when marginal cost is at its lowest. When the marginal cost is at its maximum, the marginal product reaches its lowest point. As AP reaches its maximum, AVC reaches its lowest point, and when AP declines, AVC rises.

As a result, much as AP evaluates the efficiency of variable input on a production function, AVC does the same for cost curves.