Question

Marginal product of labour will always decrease, but the marginal costs of production could decrease, increase, or remain unchanged.

True or False

Answer 1

Answer to the question:

False. The marginal product of labour may increase, decrease or remain constant. Also the marginal costs of production could decrease, increase, or remain unchanged.

Explanation: When we talk about the marginal productivity of labour, we can take the help of the Law of variable proportion. This law states if we increase the variable factor keeping the fixed factor constant, then, at first the total output increases at a increasing rate (Marginal Product increases) then at a diminishing rate (MP starts falling) and then finally the total output starts declining (MP is negative). Thus, MP also increases in the short run to some extent.

Now consider the long run, where the MP of labour increases (increasing returns to scale), remain constant (constant returns to scale) and starts falling (diminishing returns to scale). Thus, MP may increase, decrease or remain constant.

Now, in case of the Marginal Cost of production, it falls to a certain extent and start increasing. It may remain constant for some time in some circumstances.

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