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Average vs marginal productivity

What is average productivity? What is marginal productivity? Explain the relationship between marginal and average productivity. What would happen to marginal and average productivity if a technological innovation is introduced to the production process? Provide examples (numerical and graphical if you can) to explain your answer.

What is the law of diminishing marginal productivity? Give an example from your workplace of the law of diminishing marginal productivity? Might diminishing marginal productivity impact the costs?

Solution Preview

Average productivity is found by dividing total output by the number of workers. Marginal productivity on the other hand describes how much additional output the last worker has produced. As each worker produces more, average productivity increases. When marginal productivity is falling, average productivity will decline as well. However, average productivity does not change as quickly as marginal productivity because the last worker's effect on total output is combined with all previous workers', diluting its effect.

What would happen to marginal and average productivity if a technological innovation is introduced to the production process? Provide examples (numerical and graphical if you can) to explain your answer

Technological innovation will ...

Solution Summary

Detailed description of how average and marginal productivity differ. The relationship of productivity is discussed.

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