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Q1. What is the relationship between the marginal product of labour and the marginal cost? Q2....

Q1. What is the relationship between the marginal product of labour and the marginal cost?

Q2. What is the difference between diminishing marginal returns and diseconomies of scale?

Q3. Draw an average total cost curve, an average variable cost, and a marginal cost curve all on the same diagram. You do not need to include numbers or make it to scale. Make sure however that the curves have their usual shape, and that your diagram shows the correct relationships between the curves. Explanation is required .

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Answer #1

Answer to question 1 has been provided below :

Q1 )  What is the relationship between the marginal product of labour and the marginal cost?

Answer : Marginal product of labor is the increase in output due to one unit increase in labor . Marginal cost is the change in total cost due one unit change in output . So when marginal product is increasing , or the output produced by (n+1)Th unit of labor is higher than output produced by nth unit of labor then the marginal cost is diminishing . This happens since we assume that the cost of hiring every unit of labor or wage rate is constant .

Marginal cost and marginal product are inversely related to one another: as one increases, the other will automatically decrease proportionally and vice versa . Law of dimishing marginal returns plays a mojer role here .

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