This lesson is the second in the series on short-run costs of production and the law of diminishing returns. Before watching this video, make sure you’ve seen the last one in the series: THE LAW OF DIMINISHING RETURNS IN A TOY TRUCK FACTORY
In this lesson we will examine the changes in productivity experienced as more labor is added to a fixed amount of capital, measuring not only the total product, but also the marginal and average outputs of labor. Once we have output data in a table, we will graph the TP, MP and AP curve and examine the mathematical relationships between these curves.
Understanding the relationships between a firm’s short-run productivity curves will provide us with a basis for understanding how a firm’s costs of production change as the firm varies its level of output in the short-run.