What is the relationship between marginal product and marginal cost?

Question

BlackTom AI · Accepted Answer

The question asks about the relationship between marginal product (MP) and marginal cost (MC).
Option a: 'Positive relationship' would imply that as MP increases, MC also increases. This is inconsistent with standard microeconomic theory, where higher MP (for a given input) typically lowers MC because more output is produced per unit of input, reducing the cost per extra unit.
Option b: 'As marginal product rises, marginal cost does too.' This statement asserts that MC increases with MP, which contradicts the usual inverse relationship. When MP is high, the cost of producing an additional unit (MC) tends to be lower due to more efficient production, not higher.
Option c: 'Inverse (negative) relationship' correctly captures the common convex production technology relationship: MC falls as MP rises, and vice versa. Since MC is the cost of producing one more unit, when each additional unit requires less additional input due to higher productivity, MC declines, creating an inverse link between MP and MC.
Option d: 'No relationship' would ignore the fundamental linkage between productivity and cost per unit. In production theory, MP and MC are interrelated through the slope of the total cost and total product functions; claiming no relationship neglects this connection.
Thus, option c accurately describes the typical inverse relationship between marginal product and marginal cost, while the other options misstate or ignore that connection.

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