Th3.3: Diminishing Marginal Productivity

Question 1

If a factor of production is fixed, what will this do?

Answer 1

affect the business if it decides to expand

Question 2

Explain diminishing marginal productivity - give the example

Answer 2

more workers can be added relatively easily and this will increase production as machinery is used more efficiently. however, this will take a long time and adding more labour means they will have less of an impact on the amount produced as they get in the way and have not enough machines to use

Question 3

What does diminishing marginal productivity mean?

Answer 3

that if a variable factor is increased when another factor is fixed, there will come to a point when each extra unit of the variable factor will produce less extra output than the previous unit

Question 4

Why will the marginal cost of production rise?

Answer 4

marginal output will decrease as more inputs are added in the short run