# The relationship between mp and mc curves is

variable input, with a given quantity of fixed inputs, the marginal product of the variable input the relationship between the MP and MC curves is ____. We are now going to focus on the what is behind the supply curve. . Some important relationships exit between the productivity measures (TP, AP, and MP) and This results provides an interesting relationship between marginal cost and. Sep 18, The relationship between marginal cost and marginal product can be attributed to the law Thus MC of production is equal to the reciprocal of the MP of the variable factor . This equation has different curves over short and long term effects.

This section focuses on the second part of the equation, costs. In order to produce, we must employ resources, i. What happens to output as more resources are employed?

We can demonstrate the impact of adding more of a variable resource, say labor, to a fixed amount of capital and see what happens to output. For demonstration purposes in economics, we often make widgets, which is really any hypothetical manufactured device. Our widget will be made taking a quarter sheet of paper, folding it in half twice then stapling it and writing the letter W on it. If you have a big family, you can do this as a Family Home Evening activity; otherwise you can just read along to see the results.

Each round is a certain amount of time, say 40 seconds.

### Marginal and Average Product Curves (With Diagram)

What will be the output level of widgets as more labor is added? With zero workers, nothing gets produced. With one worker, the worker must fold the paper, staple it, and write the W.

Doing all of these tasks by himself, our first worker is able to produce three widgets. Marginal Product Total product is simply the output that is produced by all of the employed workers.

Marginal product is the additional output that is generated by an additional worker. With a second worker, production increases by 5 and with the third worker it increases by 6. When these workers are added, the marginal product increases. What factors would cause this?

As more workers are added, they are able to divide the respective tasks and specialize.

When the marginal product is increasing, the total product increases at an increasing rate. If a business is going to produce, they would not want to produce when marginal product is increasing, since by adding an additional worker the cost per unit of output would be declining. In The Wealth of Nations, Adam Smith wrote about the advantages of the division of labor using the example of a pin maker. He pointed out that an individual not educated to the business could scarce make one pin a day and certainly not more than twenty.

But the business of pin making is divided up into a number of peculiar trades and each worker specializes in that trade. As more workers are added, the capital, i. The law of diminishing marginal returns states that as successive amounts of the variable input, i. As the marginal product begins to fall but remains positive, total product continues to increase but at a decreasing rate.

### AmosWEB is Economics: Encyclonomic WEB*pedia

As long as the marginal product of a worker is greater than the average product, computed by taking the total product divided by the number of workers, the average product will rise. Marginal Cost and Marginal Product This diagram displays the marginal product and marginal cost for the production of Wacky Willy Stuffed Amigos those cute and cuddly armadillos, tarantulas, scorpions, and rattlesnakes.

The top panel presents the marginal product of the variable input used to produced Stuffed Amigos. The bottom panel contains the marginal cost of producing Stuffed Amigos. The marginal product curve in the upper panel has a distinctive hump-shape, with marginal product rising, reaching a peak, then falling. The rising portion of the marginal product curve is the result of increasing marginal returns. The falling portion is attributable to decreasing marginal returns, and in particular, the law of diminishing marginal returns.

The marginal cost curve in the lower panel has a distinctive U-shape, with marginal cost falling, reaching a minimum, then rising.

Unit 4 Topic 2: Curve Relationships (MP, AP, MC, AVC, and MP, AP)

The falling portion of the marginal product curve is the result of increasing marginal returns. The rising portion is attributable to decreasing marginal returns, and in particular, the law of diminishing marginal returns. The marginal cost curve can be thought of as something of a "reflection" of the marginal product curve.

## Marginal and Average Product Curves (With Diagram)

This reflection is not a perfect image, but it captures the essence of the shape. How does this work? Increasing Marginal Returns In production Stage I, with increasing marginal returns, marginal cost declines.

Because each additional worker is increasingly more productive, a given quantity of output can be produced with fewer variable inputs. Consider an extreme example. With an increasing marginal product, marginal cost decreases.

Because each additional worker is less productive, a given quantity of output needs more variable inputs.