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Review Problems

Review Problems - Review Problems 5 The MPN or the marginal...

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Review Problems 5. The MPN, or the marginal product of labor is the additional output produced each additional of labor, change in Y/ change in N As with the marginal product of capital, for small increases in employment, the MPN can be measured by the slope of the line tangent to a production function that relates output and labor. For example as you can see from the graph, when employment equals 30 million workers, the MPN equals the slope of the in tangent to the production function at point B; when employment is 90 million workers, the MPN is the slope of the line that touches the production function point C. This is due to diminishing marginal productivity of labor, the slope of the production function relating to output to labor is greater at B than at C and the PF flattens from left to right . The labor demand curve is identical to the MPN curve because an increase in the real wage causes firms to demand less labor, the labor demand curve slopes downward.
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