law of diminishing marginal returns

• What is the law of diminishing marginal returns?

  Marginal product initially rises then falls
• The law of diminishing returns applies in the short-run
• In the short-run, at least one factor of production is fixed
• What are typically considered fixed factors of production in the short-run?

  Capital and land
• Labor is generally considered a variable factor of production.
• Marginal product measures the extra output from employing one more worker
• What is the formula for marginal product?

  \frac{\Delta TP}{\Delta Q_L}</latex>
• What is the formula for average product?

  $\frac{TP}{Q_{L}}$
• Match the product type with its definition:

  Marginal product ↔️ Extra output from one more worker

  Average product ↔️ Output per worker

  Total product ↔️ Total output produced
• Average product rises initially and then starts to fall
• The marginal product curve cuts the average product curve at its highest point
• Arrange the stages of marginal product from highest to lowest:

  1️⃣ Marginal product rises

  2️⃣ Marginal product peaks

  3️⃣ Marginal product falls

  4️⃣ Marginal product becomes negative
• Why does marginal product initially rise?

  Specialization and underutilization of fixed factors
• Why does marginal product start to fall?

  Fixed factors become a constraint
• The law of diminishing returns implies that adding more workers will always increase output

  False
• What happens to labor productivity when marginal product falls?

  Decreases
• Total product is maximized when marginal product is zero
• What happens to total product when marginal product becomes negative?

  Falls
• When marginal product is positive, total product is increasing
• The law of diminishing returns can explain the shape of short-run cost curves.
• How does specialization affect labor productivity?

  Increases it
• The underutilization of fixed factors contributes to rising marginal product
• What is the relationship between marginal product and total product when marginal product is maximized?

  Total product rises at a slower rate
• The law of diminishing returns states that adding more variable factors to fixed factors will eventually lead to decreasing marginal product.
• When marginal product is zero, total product is at its maximum