CHAPTER 18THE MARKETS FOR THE FACTORS OF PRODUCTION401Notice that as the number of workers increases, the marginal product of labordeclines. As you may recall from Chapter 13, this property is called diminishingmarginal product.At first, when only a few workers are hired, they pick applesfrom the best trees in the orchard. As the number of workers increases, additionalworkers have to pick from the trees with fewer apples. Hence, as more and moreworkers are hired, each additional worker contributes less to the production ofapples. For this reason, the production function in Figure 18-2 becomes flatter asthe number of workers rises.THE VALUE OF THE MARGINAL PRODUCTAND THE DEMAND FOR LABOROur profit-maximizing firm is concerned more with money than with apples. As aresult, when deciding how many workers to hire, the firm considers how muchprofit each worker would bring in. Because profit is total revenue minus total cost,
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.