Sunday, July 21, 2013

How is the marginal product of a unit of labor determined?

The marginal product of a unit of labor is the added
amount of product that can be made when that extra unit of labor is used.  In other
words, let us say that I have three workers in my shop and we make 10 shirts per hour. 
Let us then say that I hire a fourth worker and we are then able to make 15 shirts per
hour.  In that case, the marginal product of the labor of the fourth worker is 5 shirts
per hour.


As can be seen here, we obtain the marginal
product of a unit of labor by taking the amount of the product made with
that labor and subtracting from it the amount of the product made
without that labor.

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