Answer to Question #304681 in Microeconomics for Ainsworth

Question

  How would you explain the inverted “U” nature (downward curvature) of the Marginal Product (MP) Curve? How relevant is this concept to the Manager who would like to hire labour given the plant size? 

Answer 1

According to the law of variable proportions, the marginal product of an input increases initially and after a definite level (degree) of employment, it starts decreasing. Hence, the MP curve looks like a reverse U-shaped curve in the average and marginal product curves. This helps the manager to know when more input is not required and therefore he will be able to use the input optimally.