How is the marginal product of labor calculated? As the firm increases its output, what pattern will we observe in the marginal product of labor and why does it occur?
What will be an ideal response?
The marginal product of labor is the change in total output attributable to the last unit of labor employed, keeping capital constant. It can be calculated from the slope of the total product curve for labor (which equals the change in output divided by the change in labor employed). As output levels increase, the marginal product of labor may rise at first as the firm reaps the benefits of increased specialization of labor. Beyond some point, however, the advantages of specialization will be exhausted, and the marginal product of labor will begin to fall. As the fixed capital is spread among more and more laborers, it limits the additional output that can be obtained from using additional labor.
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