Question

Explain the relationship between marginal cost, wage and marginal product of labour?

Answer 1

The relationship between marginal cost, wage, and the marginal product of labor can be explained as shown below;

$MC=\frac {W}{MPL}$

KEY

MC- represents the marginal cost

W- represents wage

MPI- represents the marginal product of labor

When marginal product of labor is high it shows that productivity of labor is more hence the lower the marginal costs of producing output. The average cost here refers to costs per unit of output.