Businesses calculate cost of adding one more output unit {marginal cost}|. Marginal costs decrease with increased production, at low output levels. Marginal costs level off as production reaches normal plant capacity. Marginal costs rise as plant nears production capacity and rise markedly when plant expands.
Businesses calculate additional output produced by adding one production-factor unit {marginal product}|. Revenue derived from extra output {marginal revenue product, price} equals price and marginal cost. Factor increases in marginal product if other factors increase, quality increases, new technology works with that factor, factor is important in overall economy, or factor has limited amounts. Factors can have fixed supply and be capable of only one use: houses, zoned land, and people with unique talents.
When businesses produce goods or services, the most-recent ones have production rates {marginal productivity}. Marginal productivity diminishes as time spent increases, because labor tires, capital wears, and natural resources and land are harder to exploit. Production units can produce good or service, in given time with given resources and technology.
6-Economics-Microeconomics-Finance
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Date Modified: 2022.0225