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Decreasing Productivity and Increasing Costs

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What is the relationship between diminishing marginal productivity and increasing marginal costs? Give examples.

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Solution Summary

Detailed explanation, with numerical examples, of why marginal costs increase as marginal productivity decreases are provided.

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Productivity is the amount of output produced by a single unit of input. For example, if your business produces shirts, one of your inputs is labour. If you have 10 workers and they produce a total of 200 shirts per day, your business' productivity is 20 shirts per worker.
Marginal productivity is the additional output obtained from increasing an input. If you add one more worker and your total output increases to 220 shirts per ...

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