ECON 103 Lecture Notes - Lecture 13: Marginal Cost, Marginal Product

• School: UMASS-Amherst
• Department: Economics
• Course: ECON 103
• Professor: Gerald Friedman

Document Summary

Microeconomics 10/19/15: marginal productivity and marginal cost. That makes the supply curve upward sloping: in the long run, where no inputs are fixed, marginal productivity is constant or increasing. Therefore, the long-run supply curve is flat or downward sloping. Because the variable inputs are increased while the fixed do not change, every increase in production is achieved, in the short run at least, by increasing the ratio of variable to fixed inputs. This will drive down the marginal productivity of the variable inputs because they will have less fixed inputs with which to work. Each worker is less productive: additional workers run out of stuff with which to work, diminishing marginal productivity of labor (or any other variable input) To get the same increases in output, you need to add even more workers. A good manager makes a spreadsheet of outputs and inputs. This spreadsheet can be used to illustrate the relationship between increases in output and rising marginal cost.