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In economics, the marginal product of labor (MP L) is the change in output that results from employing an added unit of labor. [1] It is a feature of the production function and depends on the amounts of physical capital and labor already in use.
Average physical product (APP), marginal physical product (MPP) In economics and in particular neoclassical economics, the marginal product or marginal physical productivity of an input (factor of production) is the change in output resulting from employing one more unit of a particular input (for instance, the change in output when a firm's labor is increased from five to six units), assuming ...
The demand for an additional amount of labour depends on the Marginal Revenue Product (MRP) and the marginal cost (MC) of the worker. With a perfectly competitive goods market, the MRP is calculated by multiplying the price of the end product or service by the Marginal Physical Product of the worker.
Similarly, if the third kilogram of seeds yields only a quarter ton, then the marginal cost equals per quarter ton or per ton, and the average cost is per 7/4 tons, or /7 per ton of output. Thus, diminishing marginal returns imply increasing marginal costs and increasing average costs. Cost is measured in terms of opportunity cost. In this case ...
The marginal revenue product of a worker is equal to the product of the marginal product of labour (the increment to output from an increment to labor used) and the marginal revenue (the increment to sales revenue from an increment to output): =. The theory states that workers will be hired up to the point when the marginal revenue product is ...
The marginal product of capital (MP K) is the additional output resulting, ceteris paribus ("all things being equal"), from the use of an additional unit of physical capital, such as machines or buildings used by businesses.
The term “marginal cost” may refer to an opportunity cost at the margin, or more narrowly to marginal pecuniary cost — that is to say marginal cost measured by forgone cash flow. Other marginal concepts include (but are not limited to): marginal physical product (sometimes also known as “marginal product”) marginal product of labor
The marginal physical product of a factor input (e.g. labor) must be the same for all producers of a good. We cannot reduce production cost by reallocating production between two producers. The marginal rates of substitution in consumption equal the marginal rates of transformation in production for any pair of goods.