Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 13 - Part V - The Costs of Production - Questions for Review - Page 275: 3

Answer

Marginal product refers to the increase in the quantity of output obtained that arises from an additional unit of input. Diminishing marginal product means that as more and more factors of production are employed to boost output, the rate of increase in the output decreases.

Work Step by Step

Initially the ratio is favourable and helps boost profits, but after a certain level of employment the production process gets too crowded by the factors of production; and each additional unit of labour contributes lesser and lesser additional units to the total output.
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