how does the marginal product of labor change as more workers are hired
Marginal product of labor There is a factory which produces toys. When there are no workers in the factory, no toys are produced. When there is one worker in the factory, six toys are produced per hour. When there are two workers in the factory, eleven toys are produced per hour. There is a marginal product of labor of five when there are two workers in the factory compared to one. When the marginal product of labor is increasing, this is called increasing marginal returns. However, as the number of workers increases, the marginal product of labor may not increase indefinitely. When not scaled properly, the marginal product of labor may go down when the number of employees goes up, creating a situation known as diminishing marginal returns. When the marginal product of labor becomes negative, it is known as negative marginal returns.
Factors of production In economics, factors of production, resources, or inputs are which is used in the production process to produce outputâ€”that is, finished goods and services. The utilized amounts of the various inputs determine the quantity of output according to the relationship is called the production function. There are three basic resources or factors of production: land, labour and capital. The factors are also frequently labelled "producer goods or services" to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods". All three of these are required in combination at a time to produce a commodity.