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MARGINAL PRODUCTThe marginal physical productivity or, more simply, marginal product of an input is defined as the quantity of extra output provided by employing one additional unit of that input while holding all other inputs constant. For our two principal inputs of capital and labor, the marginal product of labor (MPL) is the extra output obtained by employing one more worker while holding the level of capital equipment constant.Diminishing Marginal ProductWe might expect the marginal product of an input to depend on how much of it used. For example, workers cannot be added indefinitely to the harvesting of oranges (while keeping the number of trees, amount of equipment, fertilizer, and so forth fixed) without the marginal product eventually deteriorating. The concave shape of the total output curve in panel a therefore reflects the economic principle of diminishing marginal product.
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