Diminishing Marginal Product The slope of the production function measures the marginal product of an input, such as a worker o When the marginal product declines, the production function becomes flatter
Diminishing Marginal Product • The slope of the production function measures the marginal product of an input, such as a worker. • When the marginal product declines, the production function becomes flatter
The Total cost curve The relationship between the quantity a firm can produce and its costs determines pricing decisions The total-cost curve shows this relationship graphically
The Total Cost Curve • The relationship between the quantity a firm can produce and its costs determines pricing decisions. • The total-cost curve shows this relationship graphically
A Production function and Total cost Number of Output Marginal Cost of Cost of Total cost of Workers Product of Factory Workers Inputs Labor 0 $30 $O $30 1 50 50 30 10 40 2 90 40 30 50 120 30 30 30 60 140 30 40 70 150 10 50 80
A Production Function and Total Cost Number of Workers Output Marginal Product of Labor Cost of Factory Cost of Workers Total Cost of Inputs 0 0 $30 $ 0 $30 1 5 0 5 0 3 0 1 0 4 0 2 9 0 4 0 3 0 2 0 5 0 3 120 3 0 3 0 3 0 6 0 4 140 2 0 3 0 4 0 7 0 5 150 1 0 3 0 5 0 8 0