Question

Define marginal productivity and does it increase or decrease as more labor is hired and why

Answer 1

Answer - Marginal productivity is the change in total product by adding an extra labor. Marginal productivity increases rapidly in the beginning. After a level of output marginal productivity rise as decreasing rate and reaches to the highest. Finally it starts falling when full potential of fixed factor in used. This is called ' law of variable proportion'.

In the beginning when labor hired increase output rise at increasing rate. As more and more labor we hired output marginal productivity eventually fall when full capacity of fixed factor is used.