Lesson preview · Short Run Production
Marginal Product of Labor
~7 min · Free to read
The most important concept in short-run production is the marginal product of labor (MPL) — how much additional output one more worker produces. It’s the slope of the total product curve, and it drives virtually every hiring decision a firm makes.
Key Term
Marginal Product of Labor (MPL)
The marginal product of labor is the additional output produced by one more unit of labor, holding all other inputs constant. It’s the slope of the total product (TP) curve at any given point.
MPL: the change in output from adding one more unit of labor
Imagine a coffee shop with one espresso machine (fixed capital). The first barista can make 20 drinks per hour. Add a second barista and they can specialize — one takes orders, one pulls shots — and together they make 50 drinks (MPL of the 2nd = 30). A third barista might help with prep work, pushing output to 70 (MPL = 20). But a fourth barista starts getting in the way — output only rises to 80 (MPL = 10). This pattern — rising then falling MPL — is the essence of short-run production.
Worked Example
A coffee shop has the following production data with capital fixed:
| L (baristas) | q (drinks/hour) |
|---|---|
| 0 | 0 |
| 1 | 20 |
| 2 | 50 |
| 3 | 70 |
| 4 | 80 |
| 5 | 85 |
Calculate the MPL for each worker. At what point do diminishing marginal returns set in?
Check yourself · no marks
If the 6th barista causes total output to DROP from 85 to 82 drinks/hour, what is the MPL of the 6th barista? What does a negative MPL mean?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Practice · 1 / 4
A factory’s output goes from 100 to 124 units when it hires one more worker. The MPL of that worker is:
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