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Economics 101: Value Of The Marginal Product | SterlingTerrell.net

Economics 101: Value Of The Marginal Product


What is the value of the marginal product?

Simple.

Value Of The Marginal Product is the marginal product multiplied by the price of the output you are producing.

Take the marginal product of labor as an example.

If a factory produces 50 cars per day with 10 employees, how many cars per day can the factory produce with 11 employees?

Say the answer is 56.

This means the marginal product is 6.

Adding one unit of labor increased output by 6 cars.

And say the price of a car is $50,000.

$50,000 * 6 = $300,000

Value of the marginal product = $300,000