Today's Question
The Marginal Product (MP) measures how much extra output a firm gets from adding one more unit of an input (like one more worker or one more machine). Example: If a café produces 100 coffees with 3 baristas, and 130 coffees with 4 baristas, the MP of the 4th barista is 30 coffees. Why do you think MP typically decreases as you keep adding more of the same input?
Model Answer
This is called the Law of Diminishing Marginal Returns. As you add more workers to a fixed amount of equipment (e.g., espresso machines), each additional worker has less equipment to work with, gets in each other's way, or runs out of useful tasks. The 5th barista might only add 20 coffees, the 6th only 10, because they're sharing the same machines and counter space.
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