Question

Explain why marginal product first rises, then declines, and ultimately becomes negative. What bearing does the law of diminishing returns have on short-run costs? Be specific. "When marginal product is rising, marginal cost is falling. And when marginal product is diminishing, marginal cost is rising." Explain.

Answer 1

Marginal product changes as more workers are added.

Step-by-step explanation:

Marginal product first rises because the fixed capital gets utilized more as more workers are added. Each additional labor contributes more to output than the past laborer. As still more work is included, the theory of law of diminishing hold. Work turns out to be abundant compared to fixed affect and Marginal product falls. Likewise, total output declines, if more labor is added.